Oil markets are in a state of turmoil after the end of a week that witnessed a relative decline and great fluctuations, as Brent crude reached $84.89 per barrel, while West Texas Intermediate crude reached $80.51 per barrel, according to what the American FX Street platform reported. Oil fell on a weekly basis by 6%, and the decline in prices can be attributed to the complex interaction between economic data and geopolitical developments that sowed a state of uncertainty among market participants.
Mixed signals in the global oil market
Brent crude futures fell $1.92, or 2.3%, to $84.89 per barrel, while West Texas Intermediate crude futures fell $1.95, or 2.4%, to $80.51 per barrel.
Oil prices also fell by more than 2% only in the last sessions of last week, as concerns about the tension in the Middle East dissipated, while job data increased expectations that the Federal Reserve (the US central bank) had finished its monetary tightening cycle, which indicates a growing role in… Economic interactions and factors affect political interactions with a temporary decline in the specter of war expansion.
Markets focus on OPEC
Markets shift their focus to OPEC+ decisions regarding supplies. As for the supply from the large market led by Saudi Arabia internationally, observers indicated that the Kingdom will likely continue the process of voluntarily reducing production by one million barrels per day until December, due to its keenness to maintain market balance.
Interest rate expectations and their relationship to oil
In the United States, the slowdown in job growth in October with the addition of only 150,000 new jobs, which was a number lower than expected, indicated a possible slowdown in the labor market.
This has led to speculation about the Fed’s interest rate path with many now betting on a more cautious approach to raising interest rates. The Fed may move towards less aggressive decisions and weaker support for the dollar, which is a traditional positive factor for commodity prices, including oil.
Middle East and China
From a political point of view, previous concerns regarding supplies from the Middle East have subsided. Despite the ongoing tensions, the market has adapted without severe interruptions to the flow of oil.
Meanwhile, economic indicators in China painted a mixed picture as service sector activity showed weak growth while manufacturing contracted unexpectedly.
Since China is a major consumer of basic commodities, these developments have cast a shadow over global demand expectations.
America’s stocks
The weekly report from the Energy Information Administration (EIA) delivered another surprise as US crude and gasoline inventories rose. This increase comes despite refineries entering into seasonal maintenance work, which indicates a different demand picture. It is worth noting that the buildup in gasoline inventories was less severe than expected, while distillate inventories fell, indicating a seasonal rise in heating oil demand.
Oil price forecasts
Market sentiment will likely focus on more economic data and nuances with all eyes focused on what’s next for the Fed’s post-jobs report. The path of oil prices, despite the upward and downward fluctuations, indicates a general upward trend, as the World Bank had previously expected the price of a barrel to exceed $100 and perhaps $150 if the threat of conflict escalated due to the war launched by the occupation forces and raids.
2023-11-06 07:30:00
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