Crude oil prices continued their downward trajectory on Tuesday, despite escalated tensions in the Middle East and diminishing U.S. oil inventories. Brent crude, the global benchmark, extended its month-long decline by another 2% this week, dropping to as low as $78 per barrel. Since July 4th, Brent crude for September delivery has plummeted by 10%.
The persistent decrease in oil prices may influence discussions at an upcoming online meeting of top OPEC+ ministers scheduled for Thursday. Initially anticipated to maintain current output levels, the recent significant drop in prices raises the prospect of potential production cuts. This adjustment would come just two months after OPEC+ announced intentions to gradually increase production limits starting in October.
This week’s decline comes amidst heightened geopolitical tensions, including a rocket attack on Israel followed by retaliatory actions, exacerbating an already volatile region.
Despite declining U.S. crude supplies, which currently stand at 436.5 million barrels—approximately 5% below the five-year average for this time of year, according to the U.S. Energy Information Administration’s July 19th weekly report—oil prices have continued to fall.
Traders attribute the ongoing economic challenges in China as a significant factor contributing to the weakness in global oil markets. Furthermore, the broader decline in prices across other raw materials, as reflected in the 8% drop of the S&P GSCI Index since July 3rd, underscores concerns about a potential slowdown in the global economy, given that commodity prices often serve as indicators.
The combination of geopolitical tensions, economic uncertainties, and market dynamics underscores the complex landscape influencing current oil market trends.
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