Oil prices at lowest since July as market awaits OPEC response

Weak economic data from the US, as well as concerns about the outlook for the Chinese economy, caused a sharp drop in oil prices this week, according to Reuters. During Thursday’s trading, oil lost almost 5% and fell to its lowest level since July this year. Although sentiment in the market is currently rather negative, attention is focused on how the OPEC cartel will respond to the price slump. Analysts are also closely monitoring developments in the Israeli-Palestinian conflict and events in the region.

Oil prices have fallen for the fourth consecutive week, with crude losing almost 5% on Thursday alone and closing the day at USD 77.42/bbl. At the time of writing, prices had recovered slightly, with oil trading at around USD 78.5/bbl.

“Sentiment is negative, and so are the charts,” said Phil Flynn, an analyst at Price Futures Group. “It will take something significant to change sentiment. Until then, prices could fall further before people realise the decline has been overdone.”

US retail sales fell month on month for the first time in 7 months, as car sales and household spending on leisure activities dropped in October. The decline points to slowing demand at the start of the final quarter of this year. Traders are also noting slowing activity at Chinese refineries. This is not surprising, however, as many refineries have used up their export quotas.

Bloomberg reports that the market has entered a bear market and cites a report by the International Energy Agency. The report points to gradual and steady growth in supply. Analysts nevertheless warn against jumping to conclusions and are awaiting a response from the OPEC cartel and its allies.

“We believe OPEC will ensure prices remain in a range of USD 80 to USD 100 in 2024 by maintaining a modest market deficit,” Goldman Sachs analysts said.

ING analysts also highlight reports that the US administration said it would strictly enforce oil sanctions against Iran amid rising tensions in the region. As a result, 0.5 million to 1 million barrels of oil per day could disappear from the market.