The globe’s oil market recently took another hit. Interestingly, both the top crude benchmarks reported a consistent weekly price reduction for three consecutive weeks, this time approximately 4 percent. This downward trend continued despite the minor daily increment brought on by Iraq’s approval of the production curbs presented by the Organization of the Petroleum Exporting Countries (OPEC).
Iraq’s Backing of OPEC and Its Effects on Oil Prices
The endorsement by the Iraqi government builds on the affirmation made by industry giants—Saudi Arabia and Russia—committed to maintaining their production cuts for the rest of this year. Consequently, Brent oil prices rose by $1.42 and settled at $81.43 per barrel, while West Texas Intermediate (WTI) reciprocated with a $1.43 increment, finalizing at $77.17 per barrel.
Demand Superseding Mid-East Conflict Fears
The current market consciousness seems dominated by demand, overshadowing the anxiety that stems from potential sustained conflicts in the Middle East. This mental shift among traders was further agitated on a recent Friday when the Federal Reserve Bank of San Francisco ambiguously hinted at the possibility of a future rate hike but refrained from confirming it outright. Moreover, the latest data from the United Kingdom’s Office for National Statistics reflected Britain’s resilience. The UK managed to steer clear of a recession during the July-to-September period, although it failed to achieve economic growth.
Analysts’ Easing Crude Oil Predictions
Experts have maintained a cautious outlook on the oil market. This sentiment was clearly echoed by Capital Economics analysts who cemented their prediction of Brent oil prices concluding this year and the next at approximately of $85 per barrel. Similar sentiments were shared by analysts from the Royal Bank of Canada, including noted analyst Michael Tran. In his words, “The futures market appears oversold. While there may be some short-term, asymmetric upside for crude prices, mounting concerns of slowing demand could be enough to ease the enthusiasm for a significant relief rally over the coming weeks.”
The US Futures Market and the Oil Game
It’s worth noting that the U.S. futures market didn’t fare well either, taking a 6.2 percent dip in the course of that week. Diesel was specifically highlighted as the latest factor hampering oil. Bloomberg pointed out, “The rapidly souring sentiment caused WTI’s prompt spread to flip to a bearish contango structure at certain points on Thursday and Friday, the first time that has happened since July.”\n
