Crude oil prices witnessed a sharp decline on Tuesday, with Brent crude falling over 3%, dropping below the $70 per barrel mark. Intraday trading saw Brent crude hit $69.08 per barrel, marking the first time since December 2021 that Brent crude has dipped below $70.
Similarly, West Texas Intermediate (WTI) crude also saw a significant drop in prices, with intraday levels reaching $65.83 per barrel, reflecting a near 4% decline. The downturn in crude oil prices is attributed to weak manufacturing data from the U.S., signaling potential economic slowdown. Additionally, China’s sluggish oil consumption growth further dampened market sentiment.
Factors Driving the Decline in Crude Oil Prices
The sharp drop in crude prices is largely due to concerns over global economic growth. In the U.S., weak manufacturing data raised fears of a potential slowdown in economic activity. Meanwhile, China’s oil consumption has not shown significant growth, further contributing to the drop in prices.
In a report published at the end of August, Goldman Sachs highlighted that oil demand in China had significantly decreased, adding to the pressure on oil prices in recent weeks.
OPEC+ Decision on Oil Production
On September 5, OPEC+ members, led by Russia and Saudi Arabia, decided not to increase oil production for the next two months. This means that the group will not proceed with its previous proposal to increase supply by 180,000 barrels per day in October. The decision aims to prevent oversupply in the market amidst slowing demand.
Additionally, there were concerns about potential disruptions in oil production from Libya, where a rebel government imposed restrictions on oil output. This was expected to affect supply by around 500,000 barrels per day, but the issue was soon resolved.
Outlook for Crude Oil Prices
As global demand for oil remains uncertain, especially with economic slowdowns in major economies like the U.S. and China, crude oil prices could continue to experience volatility in the coming weeks. OPEC+ is expected to monitor the situation closely, and further adjustments to production levels may be considered to stabilize the market.
This decline in oil prices comes as a significant development, particularly for industries and investors keeping an eye on global energy markets.
Update
Money managers became net short on Brent Oil for the first time on record, following a 22% drop in oil prices since April, nearing the lowest level since December 2021.
At the same time, global oil demand grew at its slowest rate since the COVID crisis in the first half of 2024.
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