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Oil prices have now been falling for four straight weeks. The West-Texas Intermediate (WTI) crude set a peak (and multi-year high) at $76.90 around the start of October, before falling 18.7 percent to a low of $62.52 today.

An almost 20 percent fall in oil prices in a month is incredibly rare, so why has oil been falling? And will it continue to fall?

It is highly likely that at least some of the recent falls in the oil price are tied to the same loss of confidence that led to October being a terrible month for stocks. With most traders and investors around the world worrying that a US-China trade war will significantly affect the global economy, it is not surprising that one of the most important commodities saw a sell-off.

However, there are also a lot of fundamental changes going on in the world of oil itself.

Oil prices have been falling since the release of US oil inventory numbers on the 4th of October, which showed a huge jump in oil inventories – and increase four times larger than expected. This occurred the day after the recent peak, starting a sell-off which has turned into a downtrend in the oil price.

Around the same time, The Saudi Arabian government recently announced that they would increase their own oil production from 10.7 million to 11 million barrels a day by the end of the year. Such a move was surprising, given Saudi Arabia have in recent times been open about their push for higher oil prices – so that they may spin-off their sate owned oil company (Saudi Aramco) for a high price.

The Saudi move may appear a bit surprising, given that they have previously been ardent supporters of OPEC production controls to keep oil prices high. Some journalists are suggesting that the increasing commitment to rises in production they have signalled over the past few weeks may have been an attempt to placate the Trump administration (who has been calling for lower oil prices), and to dissuade Trump from condemnation of the disappearance of journalist Jamal Khashoggi.

Additionally, fresh US sanctions have been placed on Iranian exports and foreigners importing Iranian products. However, there have been exemptions granted to many countries for the import of Iranian oil, and this may have been unexpected by the market – potentially increasing oil supply forecasts amongst some oil traders – which may have helped push oil prices lower.

Whilst all of these events have helped to push oil prices down over the past few weeks, the question remains whether prices will keep falling. That is a hard question to answer, as there currently appears to be some oversupply; given that US inventories are rising. However, US oil rig counts also appear like they may be peaking – with the US and international rig counts falling last week.

At this point, like most financial markets around the world, it is likely we will need to see more information before the current uncertainty in oil is resolved. For the meantime, expect more volatility.