Oil continues to decline despite OPEC pronouncement

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By Jacob Maslow

Oil Pump Canada
Oil pumpjack or nodding horse pumping unit in Saskatchewan prairies, Canada

There’s definitely major changes in the global oil market just judging by how its price reacts to news. Previously, it only takes some minor news coming out of the Middle East or other petroleum-producing regions of the globe to send the price of oil up or down. This is no longer the case. With ISIS threatening oil supplies in Iraq and Libyan rebels taking over key parts of Libya, you would think that these developments would put upward pressure on the price of oil.

That is not happening. Similarly, it only takes a statement by the OPEC Secretary-General regarding oil’s future pricing to cause reverberations in the price of oil. This hasn’t happened. Even when OPEC Secretary-General, Abdullah al-Badri went on the record saying that oil may have hit a floor and is sure to rebound, this hasn’t had much effect on the closing price of oil. Sure, the price of crude rallied after the OPEC Secretary-General issued the statement.
However, the price went back to its previous level and then proceeded to sink. After al-Badri’s statement, the Brent crude fell 1.3% while US crude gave up 1% to settle at forty-five dollars and fifteen cents. Times have definitely changed in the global oil market. Speculative forces that used to push the price of oil up are actually now working against it. Hedge funds that bet big on an oil crash have been rewarded to the tune of billions of dollars for making the right bet. There’s still a lot of short bets on oil so expect the continued downward pressure to persist at least for the short term.
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