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Key Takeaways
- This week’s decline extends a weeks-long slide ahead of a key OPEC+ meeting on Thursday.
- Prices have defied rising tensions in the Middle East and falling U.S. inventories.
- Oil’s recent weakness coincides with a broader drop in global commodity prices.
Crude oil prices continued falling Tuesday, extending a month-long decline despite aggravated hostilities in the Middle East and dwindling U.S. supplies.
After dropping for three straight weeks, brent crude, the global benchmark, has dropped another 2% this week to as low as $78 per barrel. Since July 4, brent for September delivery has plunged 10%.
Oil’s downward trend could have implications for an online meeting of top OPEC+ ministers on Thursday.
Most analysts had expected no changes to the cartel’s current output. But this month’s decline has raised the possibility of production cuts—just two months after OPEC+ formally announced it would begin lifting current production limits in October.
Defying Events, Supplies
This week’s slide has occurred in the wake of Saturday evening’s rocket attack on Israel and the subsequent retaliation, marring an already unstable region.
Falling oil prices also have defied decreasing U.S. crude supplies.
“At 436.5 million barrels, U.S. crude oil inventories are about 5% below the five year average for this time of year,” the U.S. Energy Information Administration said in its July 19 weekly status report.
Traders have pinpointed ongoing economic woes in China as a key reason for weakness in global oil markets. But it also coincides with a broader dip in prices for other raw materials, often a sign of a cooling global economy.
Since July 3, the S&P GSCI Index, encompassing prices for 24 commodities, has declined roughly 8% after exhibiting little change in the first half of the year.