Value of crude oil might be increasing


Crude oil is once again facing problems, due to the high production of some countries, namely Saudi Arabia, which causes oil prices to fall. Based on the most recent news, Saudi Arabia is planning to decrease its daily oil production by 500,000 barrels in December. That signifies a total 0.5% decrease in the global oil production. The current price of the crude oil during 15.11.2018 was in case of WTI oil moving around 56.22 USD per barrel, in decline of 0.05% of its daily price, while Brent oil was valued at 66,53 USD per barrel with a daily increase of 0.62% of its price.

Global commodity markets have marked almost 30% decline in the price of the crude oil from the beginning of October 2018, which is the biggest short-term decline of the price of oil since 2014. OPEC member countries (Organization of the Petroleum Exporting Countries), which are mostly dependent on their income from mining the oil, Saudi Arabia specifically, consider the current situation for unacceptable. Because of that, they have announced a general assembly in their headquarters in Vienna, on the 6th of December 2018. Based on the opinions of economic analysts, some of the member countries are attempting to make the conference happen even sooner, in order to quickly react to the current situation on the global commodity market of crude oil.

The main reason behind this decrease in production is coming from the oil industry, which in this way reacts to the current development on the crude oil market. This decrease should amount to 1 million of barrels per day, which accounts for 1% of the total global production. This would negate the agreement from the June 2018.

The fact, that at least 20% of the oil correction is exaggerated and therefore market is overreacting was admitted even by Saudi Arabian minister, and the experts say we can expect that oil market will continue being quite volatile, in many countries based on their according global region. Namely Saudi Arabia, which accounts for 85% of the total OPEC crude oil production feels an enormous need to increase the oil price as their government budget largely depends on the income from mining the crude oil.

In the light of the latest development, we can expect that there will be an excessive supply of oil. Two main reasons for that are the global economy slowing down and increasing supply of the crude oil from other competing countries. That is also a reason to decrease the production of the crude oil. Cause is of course once again decreasing price of oil. Donald Trump is one of the main opponents of the OPEC coalition, and he challenges them to not decrease the production. Analysts say, that the oil production will increase by more than a million of barrels per day sometime next year. Thanks to this trend, OPEC in a consensus with Russia try to return the short-term investment horizon price of WTI oil back to 70 USD and higher, by decreasing the production.