CHART OF THE WEEK
From USD 40 in late June 2017, then USD 86 in early October 2017, Brent oil price fell below USD 60 at the end of November 2018. This sharp fall has offset more than half of the previous increase, in just two months.
OUR ANALYSIS
This steep drop in oil prices can be explained by the physical market, with a significant increase in production and therefore supply. In October 2018, 3.6 billion additional barrels were produced daily, relative to last year. This boost is recent, considering an increase of 2.8mb/d compared to May. The United States alone account for half of this rise, Saudi Arabia for a quarter.
Between 2014 and 2016, the oil market had seen supply growth far exceed that of demand, contributing to the price collapse. The stabilisation of production had thereafter allowed for a certain market equilibrium. If production remains dynamic, the barrel price is likely to pursue its decrease. The next OPEC (1) meeting will hence be crucial.
OPEC (1) : Organisation of the Petroleum Exporting Countries
The opinion expressed above is dated November 29th 2018, and liable to change
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