Article by ForexTime
Crude oil prices continue to trade under pressure, and Brent has remained under $100 dollar a barrel since the beginning of September. The decline of nearly 20% from the 2014 daily peak of $115 a barrel since early June has underpinned the weakness in the petroleum space. Prior to this decline, average monthly Brent spot prices traded within a narrow $5 barrel band from $107 to $112 per barrel for 13 consecutive months through July 2014.
During this time of record-low price volatility, substantial disruptions to OPEC supply were offset by increases in U.S. production and weaker-than-expected non-U.S. global demand. More recently, however, the return of Libyan oil production to the market, combined with the weakening outlook for global oil demand, has put downward pressure on prices.
The return of significant Libyan crude oil production, has been an important contributor to downward pressure on Brent prices. Despite the deterioration of the security situation in Libya, with the internationally recognized government having fled the capital, crude oil production increased from 200,000 barrels per day barrels a day in June to almost 900,000 barrels a day by mid-September.
Demand has been hindered by declining Economic growth in 2014 outside of the United States. China, the largest contributor to forecast increases in global petroleum demand this year, reported that industrial production has risen at the slowest pace since 2008. Further, Chinese oil demand earlier this year appears to have been supported by the purchase of strategic crude oil stocks rather than by oil use related to economic growth.
In Europe, the OECD has reduced expectations for economic growth through 2015 after data showed second quarter 2014 GDP contracted in Germany and Italy and stagnated in France. In addition to the weaker economy, which has been the primary factor weighing on crude demand, European refineries are facing increased competition from U.S. and Russian refineries, causing them to reduce utilization rates and demand for Brent crude.
Free Reports:
A rising dollar, declining demand and increasing U.S. supply will likely continue to put downward pressure on Brent Oil prices. The weekly momentum remains negative with the MACD (moving average convergence divergence) index printing below the zero index level. The RSI (relative strength index) is printing a reading of 32, which is just above the oversold trigger level of 30, at the lower end of the neutral range.
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