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HomeNewsFor The Past Seven Weeks, Oil Prices Have Been Declining. This Is...

For The Past Seven Weeks, Oil Prices Have Been Declining. This Is The Reason

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US oil futures saw a loss for the seventh week in a row on Friday, their longest losing run in five years. The prolonged decline is the result of analysts discounting the Organization of the Petroleum Exporting Countries’ pledges to restrict supply in favor of growing concerns about global production. Although markets don’t believe all members will follow through on their agreement, OPEC+—which includes Russia and other OPEC allies—agreed to reduce oil output by 2.2 million barrels per day through the first quarter of 2024.

A predicted drop in the demand for crude is another concern for the markets, particularly in China, where there are persistent indications of a faltering economy. Since the pandemic’s lowest points in late 2020, Chinese consumer prices have been declining at the quickest rate ever.

Meanwhile, the average price of gasoline in the US has decreased to roughly $3.19 per gallon. That is less than 14 cents from a year ago and roughly 22 cents from a month ago.

In order to gain a better understanding of the factors influencing the decline in the price of oil, Bell spoke with LSEG’s America’s oil analysts, Jim Mitchell, and Corey Stewart. The interview has been condensed to improve clarity and length.

Prior to the bell:

For the past seven weeks, oil futures have been declining steadily. In terms of history, is that significant?

Jim Mitchell Both yes and no. Markets will undoubtedly fluctuate; the largest commodity market is the oil one, which is enormous. But oil has a currency of its own. It finances the entire GDP of many nations.

For the past seven weeks oil prices have been declining oil

Corey Stewart:

As you can see, for a while there was a possible undersupply of crude oil, which helped to drive up prices. Additionally, it was only natural for prices to slightly decline as we moved past the traditional driving season, when we would typically see more crude runs. A decline towards the end of the year is not all that unexpected, as the crude oil market is likely to shift in the near future from an undersupply to a slight oversupply. Though it appears dramatic, you can probably predict how this will turn out given the seasonality of the situation.

Now let’s discuss supply. It appears that opinions regarding the likelihood that OPEC+ will implement production cuts have changed.


Just a few months ago, prices were beginning to creep above $90 per barrel, which provided strong motivation for other nations, including the US, to increase their energy production.

It will be more challenging for OPEC to carry out some of the strategies it has previously employed to restrict supply and raise prices because some regions of the US are currently experiencing record production. It will not succeed.

Several interesting things have been observed. China’s daily capacity for refining keeps increasing; it is currently at 15.5 million barrels. With 17.7 million people, the US is expected to be surpassed in the coming years by China.

There are limits; in order to prevent absurdity, the Chinese government will set a cap on the amount that the country’s refining sector can produce.

Can we expect oil prices to stay low through 2024?

Stewart: I do believe that the year will begin a little bit weaker in the beginning. A faltering economy will affect demand and drive down prices. However, if you simply look at history, you will see that petroleum demand has generally increased almost annually.

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