The top reported reasons behind the fall of oil prices:
The United States crude output ends the year down 25%, while Brent crude is down 20% in 2018.
- The market had concerns of a shortage of oil in the middle of 2018 which caused fear of a crude glut.
- After the stock market tanked in Q4, oil prices lost more than a third of their value causing the demand forecasts to soften.
- In January OPEC and other oil suppliers cuts take effect.
- China’s factory activity falls
- President Trump likens low prices to a tax cut.
On Wednesday January 2nd, oil prices fell to $53 a barrel. The causes are OPEC and non-OPEC producers have rising output and the forecasting of economic slowdown that could weaken demand.
In the beginning of 2018 Wall Street predicted oil would surpass $100 a barrel for the first time in four years but instead experienced its worst loss since 2015.
Official data from the end of 2018 shows that the U.S. output reached a record last October and in December Iraq boosted oil exports.
Brent fell 72 cents to $53.08 a barrel and on December 26th it dropped to $49.93. This is the lowest it has been since July of 2017. U.S. crude fell 56 cents to $44.85 a barrel.
“The current bearish bias will therefore continue in the near term and it stands to reason that oil will struggle to break out from its current trough,” said Stephen Brennock of oil brokers PVM.
In 2018 oil prices fell for the first time since 2015. This came after oil buyers fled the market in the fourth quarter over growing worries about excess supply and the economic slowdown.
In a tweet written by President Trump, “Do you think it’s just luck that gas prices are so low, and falling? Low gas prices are like another Tax Cut!”
To add to the slowing demand, reports that showed declines or slowing manufacturing activity across Asia which is the main growth region for oil demand.
Image right: US Crude, Image left: Brent Crude