(News Bulletin 247) – Oil prices are at their lowest since this summer, under pressure after crude stocks higher than expected in the United States and fears about global demand.

Oil prices are trying to stabilize this Friday. The barrel of Brent from the North Sea for delivery in January stagnates at 77.27 dollars while its American equivalent, the barrel of West Texas Intermediate (WTI) for delivery in December, stabilizes below 73 dollars

The day before, the two references had fallen by more than 4%, returning to their lowest levels since July. And over the week, the decline was even more marked, with oil prices falling by 9%.

This downward movement is explained by a weekly report on American oil stocks which showed an increase in reserves over the past week. According to figures from the US Energy Information Administration (EIA), crude reserves increased by 3.6 million barrels. This is much more than the forecasts of analysts who were counting on a smaller increase, of 2 million barrels.

Quoted by AFP, Stephen Innes, of SPI AM, underlines that “tight supply conditions which were widely expected did not materialize, as evidenced by the massive build-up of stocks in the United States”.

Meanwhile, global economies are starting to show signs of running out of steam, as in Europe, where economic activity remained in a contraction zone in October. In China, the fall in exports accelerated in October, with a decline of 6.4% over one year, according to figures published by the country’s customs, a figure which does not encourage optimism for growth from the country. These gloomy economic prospects have also erased a large part of the risk premium linked to the conflict in the Middle East.

The prices of the two global black gold benchmarks have now entered a “bear market”, meaning that they have fallen by more than 20% compared to their peak last September. The barrel of Brent returned to $95 on September 19 after the decision of Saudi Arabia and Russia to extend their voluntary production cuts until the end of the year.

A new action on the offer?

All eyes are now on the oil-producing countries. The countries of OPEC and its allies will meet on November 26 in Vienna. It is a safe bet that the countries producing black gold will do whatever it takes to support prices. This is because high oil prices are a necessity for Riyadh, which must finance colossal investments.

“Saudi Arabia is maximizing its oil revenue because it needs the money to invest in other sectors, notably in mining resources. The country is in the process of granting mineral exploration licenses on its territory, because metals will be the oil of tomorrow due to the energy transition”, explained Benjamin Louvet, director of raw materials management at OFI Invest Asset Management.

The country recently reiterated its determination to keep prices high. At the beginning of November, Saudi Arabia decided to act once again on supply, by maintaining the extension of its production cuts, to the extent of one million barrels per day, until the end of the ‘year.

For its part, Moscow has indicated that it will maintain the reduction in its oil exports by 300,000 barrels per day until the end of 2023.

“The statements from both countries indicate that the reductions will be reviewed next month to decide whether to extend them, intensify them or eliminate them depending on market conditions,” commented Giovanni Staunovo, analyst at UBS quoted by AFP.