Crude oil prices continued to slide this week, moving into either seventh consecutive weekly decline. This is now the longest consecutive losing streak in oil since the markets collapsed in 2014 and many market participants are fearing that we might be witnessing the start of a similar decline.
This week’s losses came in response to yet another record crude inventory build in the US. The latest Energy Information Administration report showed that US commercial crude oil inventories rose by 4.9 million barrels in the ending 16th November. Stocks are now standing at 446.91 million barrels, their highest level since December 2017.
Furthermore, the data showed that US crude oil production reached a record 11.7 million barrels per day, a fresh record high. Rising US oil production will come as welcome news for President Trump who has been calling for lower prices over most of the year.
Trump Calls For Lower Oil Prices
Taking to his Twitter feed once again this week, Trump wrote:
Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy! $54, was just $82. Thank you to Saudi Arabia, but let’s go lower!
— Donald J. Trump (@realDonaldTrump) November 21, 2018
Trump has criticized OPEC and Saudi Arabia in particular over the year for allowing prices to get so high and has been calling for increased production and lower rates.
However, Trump will not be so welcoming of the fact that OPEC is now reportedly planning a production cut. In a bid to stop prices from cratering any lower and further eroding profit margins, the 15 member cartel is currently working on a deal to reduce production, in line with the agreement that was eventually agreed in 2016.
Change of Heart From OPEC
The market is quite taken aback with this given that just a month or so ago OPEC was looking to step production up to stop prices from soaring any further. However, there is no word yet that the group will be able to strike a deal and many fear that disobedience within the cartel will render any agreement useless.
Oil markets have also been under pressure from the weakness in many Asian and emerging market economies in response to continued concerns over global trade wars as well as funding issues linked to rising US interest rates. Risk aversion has been sweeping across asset markets once again over recent weeks, and with a December US rate hike looking like a certainty, emerging market economies are likely to continue to struggle.
Weakened Global Growth Weighing on Oil
Indeed, in its latest outlook delivered this week the OECD said that global growth is forecast to fall over the coming years due to a combination of negative pressures from trade wars and rising US rates. The report also stated that non-OECD countries and emerging market economies such as Brazil, India, and Turkey are likely to be hardest hit.
For now, the market waits to hear the outcome of the upcoming OPEC meeting next month to see whether the group, plus Russia, can indeed agree on a production cut. In the meantime, however, with US production surging, there is little to suggest higher prices in the near term.
The rising trend line in oil now looks like a thing of the past as price continues to plummet. Oil has now traded below the 55.59 level support and is fast approaching next support at the 50.96 level. Below there and the following key levels to watch are the 42.25 low and beyond that the completion of the large symmetry swing pattern into 40.48.