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Oil prices deepen their losses to 1.5%, and US crude is below $ 80

  • 15 November, 2021
  • 4:58 pm EET

Oil prices deepened their losses to about 1.5%, during Monday’s trading, under pressure from expectations of increased supplies and reduced demand amid rising energy costs.

This comes as investors remain concerned about the strong dollar amid signs of accelerating inflation and the recent rise in coronavirus cases in Europe and China.

 

Oil Prices Today

By 12:05 pm GMT (03:05 pm Mecca Al-Mukarramah), the price of Brent crude futures – January 2022 delivery – fell by 1.6 percent, recording $80.87 a barrel.

The prices of futures contracts for West Texas Intermediate crude – for December delivery – decreased by 1.4%, recording 79.68 dollars per barrel.

 

Undo Factors

Oil markets have fallen for the past 3 weeks, weighed down by a stronger dollar and speculation that the Joe Biden administration may release oil from the strategic reserve to calm prices.

“The White House is debating how to address rising inflation, with some officials calling for the use of the strategic reserve or halting US exports,” ANZ analysts said in a report.

Last week, US energy companies added drilling rigs for oil and natural gas for the third week in a row.

The number of oil and gas rigs rose by 6 to 556 rigs in the week ending November 12, the highest level since April 2020, Baker Hughes said.

 

Oil Demand

Meanwhile, the Organization of Petroleum Exporting Countries (OPEC) last week lowered its forecast for global oil demand for the fourth quarter by 330,000 barrels per day from last month’s forecast; High energy prices impeded the economic recovery from the COVID-19 pandemic.

For its part, Russia’s Rosneft, the world’s second largest oil company in terms of production after Saudi Aramco, warned on Friday of a possible “super-cycle” in global energy markets; This raises the possibility that prices will rise as demand exceeds supply.

 

Strategic Oil Reserves

Downward pressures continued to dominate sentiment, with investor confidence shaken in recent days by signs of rising inflation in the US; The Biden administration has hinted at action to address rising energy prices in the form of SPR issuance.

“The White House has been debating how to address rising inflation, with some officials calling for the strategic reserve to be tapped or to halt US exports,” ANZ Research analysts Brian Martin and Daniel Haynes said in a note.

The latest inflation data could also introduce the US Federal Reserve’s plans to tighten its monetary policy more accommodative with early interest rate hikes.

The majority of traders were now seeking a rate hike as early as June 2022, compared to previous expectations for a rate hike in November 2022.

Simultaneously, the US dollar strengthened; Where the US currency index recorded near its highest levels not seen since July 2020.

 

Mobility Recovery

Meanwhile, the recovery in global mobility has stalled amid a slight increase in COVID-19 cases worldwide; China continues to combat the outbreak of recent cases, while several European countries, including Germany, Austria and the Netherlands, have recorded a record number of cases in recent days.

In the week ending November 8, global average mobility was about 9.8% below pre-coronavirus levels for most of the world’s major oil users excluding China, up from 8% the previous week.

IG market strategist Yip Jinrong said the outlook for oil prices will remain cloudy in the near term, with further declines not being ruled out in the coming days.

He added, “While OPEC + sticking to its production plan as stipulated previously may provide a form of support to oil prices, some uncertainty may still circulate about the action that the United States may take to limit the rise in crude oil prices.” As reported by S&P Global Platts.

He noted that the price action may remain largely muted until there is more clarity in this regard, and the $80 per barrel level may be on watch; A close below this level may indicate a lower bottom; consolidating the downside in the near term and putting $77.65 per barrel into focus afterwards.”

 

SOURCE : REUTERS

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