Oil prices experienced their most significant drop in a month following reports of a global supply surplus and weakening market indicators. West Texas Intermediate (WTI) fell by 4.4 per cent, erasing gains from the previous three sessions. Brent Crude also saw a substantial decrease, dropping by 3.9 per cent as global oil markets shift unexpectedly.
The Organization of the Petroleum Exporting Countries (OPEC) revised its market estimates, now indicating a surplus in the third quarter rather than an anticipated deficit. This adjustment comes as US production surpassed expectations, coupled with OPEC’s own increased output. According to OPEC, worldwide oil supplies exceeded demand by 500,000 barrels per day during this period, putting downward pressure on prices.
The shift in market dynamics has also prompted trend-following funds to sell positions, further exacerbating the long squeeze in oil. According to Dan Ghali, a commodity strategist at TD Securities, these funds are expected to reduce their holdings in WTI crude by roughly 25 per cent and in Brent by 10 per cent due to weakening trend signals. Further declines could be triggered if the US benchmark’s December contract falls below $US58.50 a barrel, potentially leading to additional selling pressure.
