Oil prices slide under multiple pressures
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An unusual mix of forces is pushing oil prices sharply downward as the U.S. election enters its final weeks.
Why it matters: It may keep gasoline prices moving south too, a potential lift for Kamala Harris, who faces political challenges around the economy.
What we're watching: "As long as we don't see a major hurricane head into the Gulf and the situation improves in the Middle East, the national average could fall below $3 [per gallon] in the next two months," Patrick De Haan, GasBuddy's head of petroleum analysis, said in a research note.
State of play: Brent crude prices shed another 5%-ish yesterday, falling to their lowest levels of the year.
- It followed steep drops late last week as reports emerged that OPEC+ would proceed with closely watched plans to start unwinding voluntary output curbs.
- Prices crept back up to around $74 this morning on reports saying OPEC+ might reconsider its production plan.
The intrigue: Analysts see several unrelated reasons for the recent declines:
- Weak Chinese economic data keeps arriving.
- Reports of a deal among rival Libyan factions to restore production.
- The end of the U.S. summer driving season.
Catch up quick: OPEC+ said in June it would restore 2.2 million barrels per day over a year starting in October — but emphasized course corrections could arrive along the way.
Between the lines: S&P Global Commodity Insights said one reason to expect the plan to proceed is that outside oil companies have invested to help expand capacity in OPEC+ nations like UAE, Iraq, and Kazakhstan.
- "The aim of foreign investors is not to spend billions of dollars on new oil wells and then shut them in," Jim Burkhard, a top S&P analyst, said in a note.
- Cartel leaders are also keen to maintain unity as some members push to sell more, analysts say.
What's next: "The evolution of the OPEC+ Zoom meeting has enabled the group to quickly come together and change course in a way that was not readily available when it was meeting only twice a year in-person in Vienna," RBC Capital Markets' Helima Croft said in a research note.
