Oil prices dig deep


The fall Oil prices recorded one of its heaviest declines in 2 years last Tuesday, as the United States wave of crude crashed into weak global demand and threatened the stability of some countries. Tuesday’s slide of 4.5% by Brent crude to $81.84 a barrel on the New York Mercantile Exchange (NYMEX) left the price down 20% since the start of June. Those figures were the lowest since June 2012 and analysts predict that the price will dip as much as $10 per crude barrel.

U.S.A Situation

Despite the fall in Brent Crude prices, the Organization of Petroleum Exporting Countries (OPEC) has been unwilling to rein in production. Countries like Saudi Arabia is more focused on maintaining market share even if prices should be slashed. As a result, retail price of gasoline for the US dipped nearly 15% to an average of $3.17 a gallon last week. Moreover, a steep drop in the key U.S. benchmark crude to about US$80 a barrel from around US$95 just a month ago won't be evident in companies' financial reports for the quarter ended Sept. 30. However, analysts and investors will be paying keen attention to the mood of top brass on quarterly conference calls and looking for signals about how oil market volatility may affect future plans. Meanwhile, oil and gas producers are hammering out their budgets for 2015 and might see much change in the commodity’s price.

However, while U.S. light oil production surges from shale deposits in Texas and North Dakota, the country's imports of heavier crudes continues to climb



Trader's view

Furthermore, indications that the Organization of the Petroleum Exporting Countries will not cut output to support oil markets have weighed on prices. Kuwait on the other hand, lowered official selling prices for Asian buyers in an effort to retain its market share last week, following similar moves from core OPEC members Saudi Arabia, Iraq and Iran. This week, investors will be awaiting U.S. data on consumer price inflation and new home sales for fresh signals on the strength of the economic recovery. Oil traders are looking ahead to a raft of Chinese economic data

later this week, including reports on third quarter gross domestic product, as well as data on industrial production and retail sales.


Warren Tancredi By: Warren Tancredi
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