Brent oil on Monday fell significantly due to a growth in market supply. Prices at yesterday’s close saw Brent on September contracts trading at $52.84 per barrel. The price of WTI with September delivery fell to $43.93.
Despite the IEA forecasting a growth in demand for oil in the second half of 2015, investors are becoming more pessimistic by the day because the fundamental factors are saying otherwise. The supply of oil is continuing to rise as Middle Eastern countries show no sign of slowing their production down in a bid for a bigger market share. Iraq, OPEC’s second largest producer state, has started to build up its production and in July it hit 3.064 million barrels a day (June: 3.02 million). The president of Southern Oil Company announced that Iraq will continue to maintain its current extraction levels.
The US reserves are also on the increase. According to preliminary data, this week will see oil reserves in the country up by 700,000 barrels.
The Chinese stock market is also having a negative effect on the oil market. Investors reckon that this is a signal that the Chinese economy is on the wane; meaning that there’ll be a reduction of demand from China.
Today’s oil quotes are continuing to fall and over the course of the day, Brent could fall to $51.50 per barrel, with a chance of WTI dropping to $46-46.30.
The oil quotes for the week will be affected by US oil reserves and also the outcome of the Fed convening. If the reserve confirms its intentions to increase its base rate this year, we’ll see the dollar strengthen and dollar denominated assets down in price.