Brent Crude Falls Under $87 per Barrel Taking Oil Prices at Two-Month Low

UTC by Bhushan Akolkar · 2 min read
Brent Crude Falls Under $87 per Barrel Taking Oil Prices at Two-Month Low
Photo: Depositphotos

The tighter crude supplies in Europe are easing up as refiners are filling up the stock ahead of the December 5 European Union embargo on Russian crude.

On Monday, November 21, the brent crude price tanked under $87 per barrel amid receding supply fears. The Brent Crude price for January slipped by 0.3% or 28 cents to $87.34 a barrel, the lowest since September 27.

Brent Crude Price Falls

Also, the US West Texas Intermediate (WTI) crude futures for December traded at $80 a barrel, ahead of its expiry on Monday. The more active January futures were trading at $79.90 a barrel dropping 21 cents.

Since September 27, both benchmarks closed at their lowest while extending their losses for the second week. In the last two months, Brent crude has dropped by 9 percent and WTI by 10 percent from their peak.

Tight crude supplies in Europe are just easing up ahead of December 5 European Union embargo on Russian crude. This is because refiners started piling up their stock beforehand. This has put greater pressure on the physical crude market across the United States, Europe, and Africa. The EU’s energy policy chief also stated that they are expecting regulations completed in the time ahead of the introduction of a G7 plan to cap the price of Russian crude on December 5.

Commenting on the weak December WTI contract expiration, RBC Capital analyst Mike Tran said that this indicated paper market selling instead of true physical market softness. In a note to investors, he wrote: “Tight global inventories do not support the traditional surplus of barrels rationale for contango”.

He also added that the West African and North Sea spot markets are far from strong, thus, clearly indicating signs of distress.

China’s Oil Market On the Watch

Demand in China, one of the world’s largest crude importers remains subdued due to rising COVID-19 infections and following restrictions. On the other hand, Chinese refiners have been asked to reduce Saudi crude volumes in December along with slowing Russian crude purchases.

Furthermore, countries across the globe have to deal with the brunt of the rising US Dollar. A stronger dollar makes USD-denominated oil more expensive for holders of other countries. Speaking on the development, Dennis Kissler, senior vice president of trading at BOK Financial said:

“It’s kind of a triple whammy. We’ve got COVID-19 cases rising in China, interest rates are continuing to rise here in the US and now we’ve got technical weakness in the market”.

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