Crude oil dropping on increasing global production

Crude oil dropping on increasing global production  


Crude oil has almost reached a third weekly loss, while Brent crude oil is trading near its lowest level in 13 months due to rising global oil production.

In fact, Crude oil retreated in Asian market on Friday, near its lowest level in 8 months, hitting a third weekly loss in a row, and Brent crude was trading near its lowest level in 13 months amid speculation that oil supplies rise in conjunction with the decline in global demand.

The crude oil declined yesterday toward 95.25 dollars a barrel, the lowest since January 27 2014, while Brent oil fell 2.6 % the largest daily loss since January 2nd hitting 101.9 dollars a barrel.

The main factors which pushed the oil prices down are the following:

1/ increase of
global production:

The International Energy Agency  (IEA) has showed this week that the production of the OPEC increased by about 300 thousand barrels per day to reach its highest level in five months in July at 30.44 million barrels per day, boosted by the increase of the Saudi Arabia and Libya productions. The agency has also claimed that the production of oil from Libya has increased to 430 thousand barrels per day in July.

Furthermore, in the U.S, the production of the largest oil consumer in the world has increased to 8.5 million barrels a day last month. The EIA has also reported that the crude stockpiles increased the week ending on the eighth of August by 1.4 million barrels to 367 million barrels, the first increase since last June.

2/ decease of global demand:

The key data released this week for major global economies showed uncertainty in the global economic growth, which reduced expectations of rising oil demand, for example:  Japan's economy shrunk the worst pace since the 2011, in addition to the slowing of German economy, the largest economy in the euro zone.

In China, the recent economic data indicated that the demand for oil in the second largest economy in the world fell by 6 % from the previous month.

As a result, the previous factors have contributed to the drop of the crud oil prices, which can rebound in case of increasing geopolitical tensions .So all the investors are monitoring the developments concerning the Ukraine crisis as well as the tension in the Middle  East.

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