The price of oil has fallen since the beginning of October, but why?
The price of oil has been dropping steadily since October 3rd, when it was at $80. This is down from a high of $87 in mid-September. The drop comes after OPEC failed to agree on a production cut, with Saudi Arabia saying that it wouldn’t take part in any cuts.
This is the first time that OPEC hasn’t agreed to cut production since 2008, when the organisation stopped cutting due to its own financial problems. Since then, prices have risen steadily and hit a high in June this year. However, there are many factors that could be behind the recent fall in prices.
Why is oil going down?
“Oil prices fall as Saudi Arabia signals no output cuts”
Oil prices fall as Saudi Arabia signals no output cuts https://t.co/YnQoKPzLwW
— Bloomberg (@business) October 3, 2018
On September 25th, Saudi Arabia’s Energy Minister Khalid al-Falih said that he wasn’t concerned about falling oil prices and that they were “relatively stable at this level”.
On October 1st, he reiterated his stance and said: “We do not want significant gyrations in prices either way… we do not want substantial changes one way or another because we know it will have an impact on global growth… we don’t want [oil] at $100 or $50.”
Saudi Arabia produces more than 10 million barrels per day (bpd), which is around one third of global supply.
In addition to this lack of support from OPEC members such as Saudi Arabia, there are also other factors influencing the price.
- “UAE Oil Minister: Price Drop Not a Crisis for OPEC” by Sune Engel Rasmussen for Bloomberg published on October 5th 2018
UAE Oil Minister: Price Drop Not a Crisis for OPEC https://t.co/HW8Gv4qZdM
