Oil Drops As Demand Fear Rises

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Oil Drops As Demand Fear Rises

Oil Drops By $2 As Demand Fear Rises

Demand fears have started to overshadow the oil market despite the announcement of output cuts by Russia and Saudi Arabia. Both of these countries have confirmed that they will continue with output cuts during the rest of the year 2023.

According to experts, this highlights that the global economic situation is the main driver behind the oil prices. With the macroeconomic problems faced by big economies, the markets believe that oil demand will remain depressed.

WTI Trades At $87.13

As a result of these fears, Brent crude futures contract shed $2.02, which is equal to around 2.22% of its value. Similarly, the WTI also fell by 2.35%, which is around $2.10. After the drop, Brent was trading near $88.90, while the WTI trading price was $87.13.

Earlier, an online meeting of the OPEC+ was held in which it was decided not to change the output policy of the group. The next meeting of the JMMC (OPEC+) will be held near the end of November.

According to an analyst, the market is now focusing on the ill effects of high-interest rates and the tightness that arises from them. This is overshadowing the supply cuts announced by the OPEC+ members.

On Wednesday, the Energy Ministry of Saudi Arabia announced that the supply cut will be 1 mn bpd till the end of the year 2023.

Similarly, the supply cut from the Russian side will be worth around 300K barrels per day by the end of 2023. In addition, Russia also announced that it would be reviewing a 500K barrels per day output cut, which was of a voluntary nature.

According to the Deputy PM of Russia, the supply cuts by Russia & other countries have stabilized the oil market and benefited all the oil-producing countries. Although these measures are helping to support the oil prices higher, it is also hurting its demand as consumers are trying to use fewer oil products.

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