Nov 9, 2023 - Economy

Oil prices drop to 3-month low amid record U.S. production

Data: FactSet, Energy Information Administration; Chart: Axios Visuals
Data: FactSet, Energy Information Administration; Chart: Axios Visuals

The U.S. is pumping oil at a record rate, helping send crude oil prices lower.

Driving the news: U.S crude oil prices fell to their lowest level in more than three months on Wednesday (though they ticked higher Thursday morning).

  • West Texas Intermediate crude, the U.S. benchmark, is down more than 15% since the end of September, to roughly $75 a barrel.

State of play: The decrease comes even as Russia and Saudi Arabia are sticking to their voluntary production cuts to prop up prices.

Yes, but: Global demand has been slumping, too, especially from China.

  • China is the second-largest consumer of crude oil behind the U.S., and it continues to struggle with a lackluster economy.
  • Meanwhile, U.S. oil production is steadily ratcheting up: In the last week of October, U.S. crude oil production was 13.2 million barrels per day, a new record.

The intrigue: The decline of oil prices also comes despite the current war between Israel and Hamas in Gaza, the kind of geopolitical conflict that would traditionally result in some kind of fear premium in the oil market.

  • Previous wars between Israel and Arab states, such as the 1973 Yom Kippur War, resulted in massive oil shocks.

The bottom line: U.S. production is a far bigger factor in global markets now, as is Chinese demand, and both are currently developing in a way that would favor lower prices.

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