Monday , June 14 2021

A new collapse in oil prices. Main :: Economy :: RBC

World oil prices fell again almost 7 percent, just like a week ago. Merchants fear a repeat of the scenario in 2014, when oil fell 33% in November-December

Photo by Christian Hartmann / Reuters

  • The oil market collapse continues: at the end of trading on Tuesday, November 20, Brent crude futures from the North Sea fell by $ 4.26 (-6.4%) to close to $ 62.53 a barrel , futures for US oil WTI fell $ 3, 77 (-6.6%) and ended the day at $ 53.43.
  • During the trading, Brent quotes dropped by a maximum of 7.6% to $ 61.71 – the lowest level since December 2017.
  • Since early October, Brent's price dropped by 28%, WTI – by 30%.

What was the reason?

  • The reason for the new collapse of oil prices was the general flight of investors from risky assets – primarily stocks. US stocks fell 1.7 percent to 2.2 percent, and now Dow and S & P are 1 percent below the levels at the beginning of the year.
  • The last two months were unsuccessful for the US stock market: investors set their interest rate projections and expect that corporate revenues will deteriorate in 2019, amid US-China trade warfare. The largest US tech companies, known for the FAANG (Facebook, Apple, Amazon, Netflix, Google), have recently lost $ 1 trillion in market value.
  • Markets around the world do not feel very well: last month, capitalization of the global market fell by $ 8 trillion – players fear a slowdown in global economic growth.

"When the stock market loses 8-9%, it causes an image of a weak global economy, and it contributes to the expectations of a weaker demand for oil than expected," said Jim Ritterbush, President of Ritterbusch and associates, Reuters quoted.

  • A catalyst for declining oil prices on Tuesday was US President Donald Trump's statement on bilateral relations between the United States and Saudi Arabia following the killing of Saudi journalist Jamal Hashkadzi. Recently, US media reported that the CIA concluded that Saudi Arabian prince Mohammed bin Salman Al Saud had ordered the killing of a journalist in Istanbul, but Trump made it clear that Saudi Arabia remains a partner of the United States, regardless of the circumstances of Khashaji's death.
  • The risk of geopolitical friction between Riyadh and Washington was a factor that supports oil quotes, but Trump's statement eliminated this factor.
  • "Saudi Arabia is the world's largest oil producer in the US, they work closely with us and are sensitive to my demands for maintaining oil prices at reasonable levels," Trump's statement was a source of speculation that the US, in return for humiliation, after the assassination of Hashakya could secure the promise of Saudi Arabia. reducing oil production at the December OPEC meeting.

Now investors fear the repetition of the scenario in 2014 (then, in November – December oil prices fell by 33%), notes Bloomberg. Four years ago, the market was also preparing for the fact that OPEC would reduce oil production to support quotations, but the cartel decided to postpone it. The day after the disappointing OPEC meeting in November, oil prices fell 10 percent, and a month later the fall reached 25 percent. In 2015, oil prices fell below $ 40 a barrel.

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