Five reasons why oil prices fell since early October
Baku, Azerbaijan, Nov.7
By Leman Zeynalova – Trend:
Oil prices have fallen since the beginning of October with North Sea Brent at about $73 per barrel now only, as against $85-86 per barrel at the beginning of October, Francis Perrin, Senior Fellow at the OCP Policy Center (Rabat) and Senior Research Fellow at the French Institute for International and Strategic Affairs (IRIS, Paris), told Trend.
He pointed out that there are five reasons for this evolution:
- US crude stocks rose for several consecutive weeks, which had a bearish impact on prices;
- Thanks to OPEC, especially Saudi Arabia, Russia, and unconventional oil in the US and Canada world oil supply has been so far sufficient to meet a growing oil demand despite falling Iranian oil exports;
- The Trump Administration has awarded waivers to eight countries, which means that there will be some flexibility in the world oil system over the next few months;
- Saudi Arabia recently restated that it will do what is needed to avoid a shortage on the world oil market;
- The International Energy Agency (IEA) slightly revised downwards its projections of oil demand growth for 2018 and 2019.
The forecast for demand growth in 2018 and 2019 has been reduced for both years by 110,000 barrels per day (b/d) to 1.3 mb/d and 1.4 mb/d, respectively, according to the IEA report.
This is due to a weaker economic outlook, trade concerns, higher oil prices and a revision to Chinese data.
Demand in the countries of the Organization for Economic Co-operation and Development (OECD), supported by a strong 1Q18 and robust US growth, will expand by 300,000 b/d in 2018, slowing to 130,000 b/d in 2019, according to IEA.
There is no peak in sight for demand, said the IEA. “The drivers of demand remain very powerful, with petrochemicals being a major factor.”
Follow the author on Twitter: @Lyaman_Zeyn