US oil enters a bear market due to rising inventories and overabundance of supply

The benchmark US index had reached its highest level in four years, at $ 76.41 a barrel, just over a month ago, Oct. 3. But since then, it has fallen sharply due to rising production, the easing of US sanctions against oil, trade tensions that are raising concerns about slowing global economic growth, which could turn reduce the demand for oil.

Oil sales have intensified in the past two days after a report by the Energy Information Administration showed that US oil inventories rose for seven consecutive weeks to reach their highest level in five months, 432 million barrels. The report also indicated that US oil production reached a record 11.6 million barrels a day, driven largely by shale production such as West Texas and North Dakota.

"The construction of the crude has certainly not helped prices," said Mark Wagoner at Excel Futures. "But behind these numbers, and what many ordinary people do not know – but oil traders certainly know it – the United States has just become the world's largest crude oil producer, a few weeks ago, to hardly screamed by Russia.It's huge. "

Last week's decision by the Trump government to grant waivers, or exceptions, to its oil sanctions against Iran added to the pressure on oil prices. The United States has allowed eight countries to continue buying Iranian crude. This has basically put an end to any fear of a reduction in the offer created by sanctions, at least for the moment.

"Even before the announcement of a larger number of sanctions levies by Iran on Friday, market sentiment has deteriorated sharply," Energy analysts said. Aspects in a research note. "In a context of economic uncertainty due to trade tensions, negative positions between the US and China, or investors who are betting on higher prices, have 'dropped out'.

Hedge funds and other speculative investors have abandoned bullish oil bets. Bullish bets on US crude were more numerous than bearish 4-1 bets on Oct. 30, well below the 26-1 ratio in early July, according to data from the Commodity Futures Trading Commission.

The new price cut this week highlights the importance of a meeting in Abu Dhabi on Sunday between members of the Organization of Petroleum Exporting Countries, as many expect the group to consider cutting production to stimulate world oil prices.

"Faced with the latest price drop and oversupply that is expected to materialize next year, OPEC plans to cut oil production",

Commerzbank

Analysts said in a note.

Russia, along with OPEC-led Saudi Arabia, has pumped more oil since the summer to make up for the loss of Iranian barrels, which is now expected to be smaller than expected because of exemptions granted to certain purchasers.

Falling crude prices also reflect a weaker demand outlook.

The International Monetary Fund lowered its global economic growth targets in 2019, citing the trade dispute between the United States and China as one of the factors of the planned reduction. About a week later, the International Energy Agency lowered its forecast of oil demand growth for this year and the following year. The IEA cited the rise in oil prices in its decision.

Among refined products, futures for gasoline delivered in December decreased 0.2% to $ 1.6443 per gallon. Futures prices for diesel dropped 3.1% to $ 2.1683 a gallon.

Corrections & Amplifications
An earlier version of this story had misspelled the name of Excel Futures and had announced a rise in diesel prices. Diesel fell on Thursday. (November 9)

Write to Dan Molinski at [email protected]