Crude oil prices recovered 29 cents this morning as smart traders bought up the cheap commodity, which is expected to recover to trade near the 95 price over the next months. On the other hand Brent Sea oil continues to decline trading this morning at 100.13 down by 14 cents. Brent oil broke below the $100 price level on Monday. Benchmark crude oil prices fell to 15-month lows Monday, a move that’s likely to accelerate already falling gasoline prices heading into fall. The strength of the US dollar which moves to a 2014-13 high this morning is also weighing on prices. As the greenback approaches the 84.50 price level, dollar denominated commodities are becoming expensive to purchase in foreign currency.
October contracts for Brent crude oil fell below 100 for the first time since May 2013 and are trading at about 100.32 a barrel, while West Texas crude dropped 30 cents to near 2014 lows at 92.99 a barrel. Behind the slump: easing geopolitical tensions in Ukraine and the Middle East and signs that China’s economy is slowing. World oil prices eased on Monday in response to the weaker-than-expected Chinese and US economic data.
The moves crippled energy stocks Monday, but helped push U.S. wholesale gasoline prices down nearly 1% to 2.56 a gallon, the lowest since November 2013. Gas prices currently average 3.44 a gallon, a six-month low. Prices are expected to fall to about 3.25 heading into the final months of the year on less demand, robust supplies and a mid-September switch over to less costly winter blends.
Increased U.S. production is helping to create an oil surplus on world markets, driving down prices despite a myriad of threats to oil supplies, and doing more to crush Russia’s economy than the sanctions imposed by the U.S. and European Union, said Chris Faulkner, chief executive of Breitling Energy.
The growing oil surplus, in fact, may have forced Russian President Vladimir Putin’s hand, since it has made usually volatile global oil markets extraordinarily placid in the face of multiple threats ranging from Russia’s aggression in Ukraine to the terrorist takeover of northern Iraq, war in Israel, multiyear disruptions in Libyan oil output and lingering sanctions on Iran.
Oil’s slide below $100 a barrel yesterday brings prices closer to levels where more OPEC countries face financial worries, prompting some in the producer group to voice concern about too much oil in the market. Leading exporter Saudi Arabia favors oil at $100, which many others in the 12-member group also support. For now, Organisation of the Petroleum Exporting Countries delegates said yesterday they were not alarmed, expecting winter demand to support prices. But still, signs of concern are emerging about the level of supplies. Another OPEC delegate said prices were under pressure from too much oil, something some member countries were watching. Most OPEC officials surveyed by Reuters continued to see the price drop as short-lived.
Article Author: Barry Norman, FX Empire Analyst