Yesterday, the oil downtrend accelerated. For instance, WTI oil broke below $27,50 per barrel. The instant and sharp decline in the market of crude oil followed a slight recovery seen earlier on the trading day. It looks somewhat strange given the fact that the recent U.S. oil inventories report seems to be favoring oil prices and backing their recovery. The thing is that the inventories shrank despite expectations of growth.
Apart from reporting a decline in oil inventories, the U.S. Energy Information Administration (EIA) reports that production cuts by 0,3% or 28 000 barrels a day. This is also a bullish sign for crude oil. So, why crude oil is going down in price once again?
According to Masterforex-V Academy, the key reason why oil resumed its downtrend is the latest report released by the International Energy Agency (IEA) and containing data unfavorable for oil exporters. In particular, the IEA’s report says that OPEC unexpectedly increased its oil production in January 2016. The report also hints at abundant oil reserves around the globe. Also, Iran and Kuwait are adding fuel to the fire by saying that they are planning to increase their oil production this year.
With that being said, the IEA’s experts have downgraded their oil forecast. The revised forecast says that the average price of crude oil is expected to be somewhere between $57/b and $58/b, which is $3/b lower than the figures given in the previous forecast.
As for WTI, on February 10, the price dropped all the way down to $27,39 per barrel and is now trading within the price range of 27,39 - 29,22 dollars per barrel, Masterforex-V Academy experts report.
As for Brent oil, it is trading within the price range of 30,36 - 31,90 dollars per barrel.
Still, oil exporters have more reasons for concern. The thing is that Iran is not only going to sell crude oil in big quantities and at a big discount. The local authorities are planning to introduce a currency mechanism leading to favorable conditions for the importers of Iranian oil. In particular, they are planning to start selling oil for other major currencies on top of the U.S. Dollar.
As you probably know, the Fed is currently making the U.S. Dollar stronger, which also makes crude oil and other commodities less affordable for importers since all the transactions are made in dollars. That is why Iran is planning to attract new importers by letting them use other currencies instead of buying more expensive dollars to buy crude oil.
