Weekly Oil Price Drop: it's not that significant

 

weekly drop in oil price

Although oil price dropped this week, the fall is not that significant, when compared with what it was last week.

The drop in price, however, has rattled the markets somewhat, as the factors which usually influence the oil price were not in favour of an unstoppable rally.

For example, the US crude oil inventories have gone up, deviating from the trend that had been the opposite for a few weeks. In addition, the high infection rates – and the deaths too – both in the US and Europe have finally had an impact on the investor-confidence.

us oil inventories


The fear of stricter lockdowns in China may have played a role too, as the latter is a key player when it comes to global demand.

In this context, the twin move by the UAE and Saudi Arabia to cash in on the situation does not seem to be working in the long run; not only did they increase the crude oil price for Asia, but also cut down on the output, while warning the US shale producers not to flood the market with excess oil; whether the latter will heed the call is an entirely different matter.

Although the move by the OPEC+ members are understandable, the logic behind pursuing a production cut of this magnitude, especially by Saudi Arabia that amounts to 1 million barrels per day, is open to debate in the current economic climate.

As far as traders are concerned, the crude oil price that fell during this week, may not see yet another plummeting scenario, mimicking simple gravity.

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