Even thin trading due to the Thanksgiving holiday weekend in the United States couldn’t prevent oil prices from dropping to 2018 lows on Friday. As of 2:03 p.m. HK/SIN, U.S. WTI futures were down 2.58 percent to $53.22 per barrel. Brent crude futures were down 1.25 percent to $61.82 per barrel. Brent had fallen to $61,52, its lowest price since December 2017, earlier in the trading session, before rebounding slightly. WTI futures were trading within 5 cents of their October 2017 low on Friday.
Even hints from OPEC and Russia that they would be implementing a supply cut in the coming days did little to stop the decline or to calm trader concerns about the state of the oil market and the ongoing supply glut.
Oil prices in the U.S. are somewhat tighter than they are in other parts of the world, due to increased supply in the region. The U.S. is now producing at record highs and has become the world’s biggest producer. Russian and Saudia Arabian production is close behind – for the moment. Together, the three leading producers are yielding nearly 100 million barrels per day.
The high production itself wouldn’t necessarily cause prices to drop, but increased production coupled with the fear of a global economic slowdown which could reduce demand has caused oil prices to drop quickly, falling over 30 percent since last month. Saudi Arabia is lobbying for OPEC to reduce supply by up to 1.4 million barrels per day to prevent stocks from rising further. An official decision will be released after the group’s next meeting on December 6th.
In response to recent price movements, JP Morgan has cut its outlook for oil from an average of $83.50 per barrel in 2019 to $73 per barrel. JP Morgan has said that in order to balance the market, OPEC will need to cut production by at least 1.2 million barrels per day.