Oil prices faced another day of losses today, extending a decline of more than 3 percent and reaching a six-month low. The decline is attributed to a combination of oversupply concerns and fears related to global demand.
Brent crude futures for February saw a 0.45 percent decrease, falling by 33 cents to $72.91 per barrel by 06:21 GMT. Meanwhile, U.S. West Texas Intermediate crude futures for January dropped 0.42 percent to $68.32 a barrel.
Oil prices slipped further as overnight trade revealed firmer-than-expected U.S. inflation readings for November. This bolstered the belief that the Federal Reserve would be unlikely to cut interest rates early next year, potentially impacting oil consumption.
ANZ analysts reported a surge in weekly average Russian crude exports to the highest levels since July. This development intensified oversupply concerns, which doubted the effectiveness of the recent output cut agreement by OPEC+.
Moreover, the U.S. Energy Information Administration raised its oil supply forecast for 2023 by 300,000 barrels per day, projecting a total of 12.93 million barrels per day. This outlook puts the oil prices on track for an eighth consecutive week of decline.
A policy meeting by the U.S. central bank, concluding today, is expected to influence market direction. Tina Teng, a market analyst at CMC Markets states: “A more hawkish-than-expected stance by the Fed may cause a further drop in crude prices.”
Volatile oil market
Additionally, global geopolitical factors contribute to the volatile oil market and prices. Moreover, the cost of shipping through the Red Sea is rising due to increased tensions in Yemen. Meanwhile, nearly 200 nations reached a historic deal at the COP28 conference to begin reducing global fossil fuel consumption, signaling a shift away from oil and other fossil fuels.
As the oil market grapples with oversupply, geopolitical tensions, and uncertainties surrounding global demand, market participants are closely watching the Fed’s decision and its potential impact on oil prices. The historic COP28 agreement further underscores the shifting landscape for fossil fuels, leaving the industry at a crossroads. Investors and analysts anticipate a period of volatility as the market navigates these multifaceted challenges.
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