The oil market of the world is experiencing its biggest test in the past few months as it faces a tidal wave of supply. The increased supply has also rose worries relayed to the economic weakness which is gradually decreasing the demand all around the world.
Just a month ago, the prices of oil per barrel topped out at $75 and $85 and the United States crude along with Brent benchmark futures wrestled in continuous selling.
There was once a period when there was a hope that the renewed sanctions of the United States on Iran would act as a strong force to take the barrels off the market, though that did not happen.
The scenario changed last week when the three largest producers of oil in the world namely Russia, United States and Saudi Arabia that they were pumping oil into the market at a level that has not been achieved earlier.
United States however stated that it would lessen the threat of supply crunch by permitting waiver which would allow the buyers to continue with the importing of the Iranian oil.
The weakening of the economic markets of China and other developing countries along with these factors clubbed together were responsible for the resurgence of worries related to the oversupply.
These worries have pushed the United Futures to a low which it has not experienced since the April of this year.
For several months, the structure of the U.S crude oil futures was indicating a tight supply but the scenario has changed now and investors now think that in the coming month the oil market would be awash with oil.
For the current week’s formal re-imposition by the United States against Iran in terms of sanctions, the oil market ranked higher in anticipation. The concerns that the oil producers from Saudi Arabia will fail to make up the difference was also high.
Source: Reuters, Community.oilprice
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