The price of West Texas Intermediate (WTI) for January delivery and Brent crude for January delivery lost 10.7 percent and 11.9 percent, respectively, during the week ending November 23.
Futures settled down 0.1 percent on Tuesday in NY after dipping close to a 13-month low earlier in the session. The question for many investors and traders is whether a bottom has been reached or if it is still a falling knife.
Oil prices jumped on Monday, as US largest online shopping day boosted stock markets and investors anticipated an OPEC meeting next week to cut output worldwide. Indian consumers do not seem to be getting the full benefit of the oil crash. Firstly, the RSI is issuing an oversold signal.
The last time world oil prices crashed - in 2014 and 2015 - the kingdom was forced to rethink its finances.
Fereidun Fesharaki, chairman of energy consultancy FGE, said a failure by OPEC and Russian Federation to cut supply significantly would mean crude prices would "fall further, perhaps (with) Brent at $50 per barrel and WTI of $40 per barrel or less".
"It's impossible now to do fundamental analysis with any form of certainty because of what's going on with the US Administration and their relationship with Saudi Arabia", Amrita Sen, chief oil analyst at Energy Aspects, told on Wednesday.
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Can we expect a major rebound in oil prices? Its budget deficit swelled to a record $100 billion in 2015 (15% of GDP) and the International Monetary Fund warned that some Gulf countries, including Saudi Arabia, could run out of money within five years if prices stayed low. Diesel and petrol have fallen 7-11% since early October, even as worldwide fuel prices, are down by a quarter.
Possibly complicating Saudi decisions on oil output is the crisis around the killing of journalist Jamal Khashoggi at Riyadh's consulate in Istanbul last month.
Still, a price increase from current levels hinges on action from OPEC+.
The industry source, who is familiar with the matter, said Saudi crude oil production hit 11.1-11.3 million barrels per day (bpd) in November, although it will not be clear what the exact average November output is until the month is over. The demand growth is expected to weaken again in 2020. That is an increase of 500,000 Bpd from the group's forecast six months ago. -China trade frictions and push for a pullback in future oil productions.
Even the prospect of a near-certain cut in output by the Organization of the Petroleum Exporting Countries has not been enough to stem the slide. Amid slower demand growth, we expect a near-term upside risk to our demand due to a pre-election demand surge in India in Q1 of 2019 and a possible de-escalation of the trade dispute between the U.S. and China.
A "no-cuts" OPEC meeting may fulfill President Trump's wish for further declines in oil prices, and by extension, lower gasoline prices, but in the low $50s or below is dangerously close to the breakevens in some United States shale plays that have been booming with the higher oil prices. A positive outcome from the meeting would be supportive of global economic growth and oil demand relative to our current central scenario.