- Oil Prices Drop to One Year Low on Rising Global Supply
Global oil prices plunged to their lowest levels in a year after Saudi Energy Minister Khalid al Falih said the Kingdom’s production in November would surpass October’s output.
The fall in prices has increased the possibility of OPEC going ahead with production cut in its Vienna meeting scheduled for December 6. The cartel is expected to announce oil production next month.
In the last seven weeks, oil prices have dropped over 30 per cent in value due to Iranian waivers and slowing global growth.
“I have to say that the speed in which the oil market has declined has surprised me even as OPEC and non-OPEC members discuss a production cut,” said Andrew Lipow, president of Lipow Oil Associates. “The market does not think it will be enough.”
Price of Brent, against which Nigerian Crude is measured, dropped 5.9 per cent to $58.9 on Friday. The lowest since October 2017.
While U.S. West Texas Intermediate crude oil declined by 7.7 per cent to $50.42 a barrel. Also, the weakest price level since mid-October 2017.
Falih on Thursday said Saudi Production level would hit 11 million barrels per day in November, more than the 10.6 million pumped in October. Currently, the Kingdom is pumping a record 10.8 million to 10.9 million bpd.
Despite projected slow in demand in the first quarter of 2019, crude oil production continued to rise.
In the U.S, crude oil production rose to 11.7 million barrel per day, according to preliminary weekly report.
While Russia has maintained post-Soviet-era highs above 11 million barrel per day in recent months.
Therefore, rising global supply amid slowing global growth is weighing on oil outlook as investors look to cut their long positions.
Tamas Varga, a senior analyst at PVM Oil Associates, said in a note: “The question is … How much longer (are) bears are able to keep firing?.” Suggesting until OPEC reached a solid production agreement, oil is likely to average $60 – $65 a barrel in the next quarter.
