Energy
Wednesday, September 4th, 2024 2:23 pm EDT
Key Points
- Oil Prices Drop and Speculation on OPEC+: U.S. crude oil prices fell 1% on Wednesday, dropping below $70 per barrel and hitting a low of $69.19, the lowest since December 13. Both U.S. crude and global Brent benchmarks have erased their 2024 gains. This decline has led to speculation that OPEC+ might delay its planned production increases scheduled for October.
- Impact of Economic and Market Conditions: The drop in oil prices is attributed to weak manufacturing activity in the U.S. and China, which has reignited concerns about an economic slowdown. Additionally, equity markets experienced a significant sell-off, with the S&P 500 having its worst day since early August.
- OPEC+ Production Plans and Market Sentiment: OPEC+ had initially planned to increase oil production by 180,000 barrels per day in October, but there are reports suggesting the group might consider delaying this increase due to current market conditions. The uncertainty around the political situation in Libya and overall weak market sentiment are contributing to this potential delay. UBS expects Brent prices to recover to $80 per barrel in the coming months, despite the current bearish market outlook.
On Wednesday, U.S. crude oil prices fell 1%, dropping below $70 per barrel and raising concerns that OPEC+ might delay planned production increases set to begin next month. The U.S. benchmark hit a low of $69.19, marking its lowest point since December 13, and has lost more than 4% on Tuesday alone. Both U.S. crude and the global benchmark, Brent, have erased all their gains for 2024. The decline comes amid uncertainty over demand growth and the unlikely prospect of significant supply outages. Svetlana Tretyakova, a senior analyst at Rystad Energy, emphasized that until OPEC+ clarifies its strategy, bearish sentiment in the market is expected to persist.
As of Wednesday, West Texas Intermediate (WTI) crude for October delivery was priced at $69.58 per barrel, down 76 cents or 1.08%, with a year-to-date decline of 2.9%. Brent crude for November delivery fell to $72.97 per barrel, down 78 cents or 1.06%, and has seen a 5.1% decline this year. Gasoline prices also fell slightly to $1.96 per gallon, down more than 1 cent or 0.85%, reflecting a year-to-date pullback of about 6.7%. Natural gas prices increased to $2.23 per thousand cubic feet, up more than 2 cents or 1.27%, though it remains 11.3% lower year-to-date.
The oil market has been pressured by weak manufacturing activity in both the U.S. and China, which has heightened concerns about an economic slowdown. Additionally, equity markets experienced a sell-off on Tuesday, with the S&P 500 suffering its worst day since early August. OPEC+ plans to increase oil production in October, but there are reports that the group might delay these increases due to current market conditions. A potential resolution to a political dispute in Libya could also affect supply disruptions from the North African country.
Despite these factors, UBS strategist Giovanni Staunovo noted that the market’s reaction to supply news shows the current weakness in sentiment. Staunovo suggested that with prices depressed, OPEC+ might pause the planned production increases. Additionally, there is uncertainty regarding the stability of the Libya deal. Despite the market being undersupplied with declining oil inventories since May, UBS remains optimistic and forecasts that Brent prices will recover to $80 per barrel in the coming months, advising risk-seeking investors to sell downside price risks in crude oil.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/09/04/crude-oil-prices-today.html
