According to the news report by Bloomberg, the US benchmark for crude oil, the West Texas Intermediate futures have slipped for a record breaking 12 consecutive days thanks to fears of a supply glut similar to the one that brought oil markets to their knees in 2014 is now a strong possibility. The international crude oil benchmark, Brent futures have been down for 11 of the last 12 sessions.
In the past what Trump tweeted has impacted the OPEC. Thanks to the President of the United States’ tweets, in June this year, Saudi Arabia convinced its fellow oil producers that they should put a stop to the last 18 months’ cuts in production and start increasing oil supply to offset the reduction in output from two of the major oil producers – Venezuela and Iran.
OPEC leaders clearly stated that it was Trump’s tweets that were the trigger for their decision to increase oil production.
Just a month ago, experts were predicting that oil prices could go as high as $100 as concerns about a shortage of oil mounted. However, now, hedge funds have given up on the possibility of oil prices going up, thereby pushing the price of oil down even further.
According to data taken from the CFTC (Commodity Futures Trading Commission), hedge fund managers’ combined bullish positions on both the West Texas Intermediate as well as the Brent fell to their lowest in the last 14 months.
West Texas Intermediate futures for December delivery were down 2 cents to touch $55.67 per barrel. The price of oil on the WTI dropped even more by $4.24 on Tuesday to end the trading day at $55.69 per barrel.
Total trading volumes for Wednesday were around 42% higher than the 100-day moving average.
The international benchmark Brent futures for January delivery was down by $4.65 to close the trading day at $65.47 per barrel on the London ICE Futures Europe Exchange. Brent was trading at a premium of $9.63 to the WTI for the same period.
A meeting of the OPEC+ producers last weekend did not yield any concrete results with regard to a change in oil output policy. However, the delegates at that meeting cautioned that they would probably need new policies soon.
Saudi Arabia has already announced that it is going to cut oil production by 500,000 barrels of crude oil per day from next month onwards. Oil majors Venezuela and Oman indicated that they would be siding with Saudi Arabia with regard to oil production cuts. However, the Russian Minister for Energy, Alexander Novak was less enthusiastic about this plan. In a Bloomberg Television interview on Monday, the Russian minister said that they would wait and see how the oil market unfolded.
Another issue that oil prices are facing is the sudden increase in the value of the US dollar. The Bloomberg Dollar Spot Index shot up to the highest the dollar has been since May 2017 during early morning trading on Tuesday. Thankfully, the dollar then slipped back somewhat.
According to RBC Capital Markets, the meeting of the OPEC+ group in Abu Dhabi this Sunday has raised the possibility of a cut in the global production of oil to “quite high”. The reduction could be as much as 1 million barrels of crude oil per day.
In the United States there are strong indications that there could be an oil glut. In fact, according to a crude oil inventories forecast put together by Bloomberg, crude oil inventories stored at the major pipeline nexus in Cushing in Oklahoma increased by about 2.5 million barrels last week.