Oil prices fell 5% on Tuesday, weighed down by disappointing economic announcements from Beijing and the prospect of abundant oil production in the months to come. The price of a barrel of Brent from the North Sea, for delivery in December, briefly fell by more than 5%, before rising slightly. It lost 4.36%, to $77.40, around 3:40 p.m. GMT (5:40 p.m. in Paris). Its American equivalent, the barrel of West Texas Intermediate (WTI), for delivery in November, fell by 5% and fell further by 4.56%, to $73.62, around the same time.
During a conference eagerly awaited by the markets on Tuesday, the Chinese authorities limited themselves to reaffirming their confidence in the achievement of their economic objectives, but without unveiling new recovery measures, disappointing investors’ expectations. “It’s clear that the market wanted more” faced with the economic difficulties that Beijing is going through, estimated Stephen Innes, analyst at SPI Asset Management. As China is the leading importer of black gold, its economic health strongly influences crude prices.
Furthermore, Libya continues to revive its oil production after the resolution of a political crisis which had closed the taps. Libya’s state-owned oil company, National Oil Corporation, announced on Tuesday that it had produced 1.13 million barrels of crude in 24 hours.
The fall in oil prices on Tuesday comes the day after the threshold of 80 dollars per barrel was exceeded on Monday, the highest level of Brent in more than a month, pushed by the situation in the Middle East. “Brent remains 5 to 10 dollars above the level at which it would trade if there was no risk of conflagration”estimated Ole Hansen, analyst at Saxo Bank.
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In the short term, prices could rise due to the conflict in the Middle East and its possible consequences for Iranian supplies, but, in the longer term, analysts expect depressed prices in 2025. OPEC+ (Organization oil-exporting countries and their allies) has an unused capacity of almost “6 million barrels per day and Saudi Arabia alone is capable of increasing its production by almost 3 million barrels per day”underlined Ole Hvalbye, SEB analyst.
