Current Crude Oil Prices Fall to Lowest Rate in Five Months

The recent oil futures dropped by over 2% to reach its lowest in five months as a possible nuclear agreement between the West and Iran relieved inventory worries. Meanwhile, questions regarding demand were raised due to concerns surrounding the future of Greece in the eurozone.

Government data from the United States showing poor demand and the weekly buildup of domestic crude supplies for the ninth consecutive week, as the country prepares for the beginning of the summer driving season, gave additional pressure to the market.

Crude faced pressure early due to worries from investors regarding the possible exit of Greece from the eurozone. The result was a widespread decision to sell equities and commodities and flock to safer currencies like the Dollar.

Concerns that a slow economy in the eurozone can hurt demand for fuel has aided in pushing down Brent crude oil prices from its highest rate this 2012 of $126 to only $105 per barrel.

Officials of the eurozone reached an agreement that every nation in the eurozone must have its contingency plan in case Greece makes a decision to depart from the currency bloc. They came into agreement during the Eurogroup Working Group’s teleconference, which lasted for almost one hour last Monday.

In addition to the oil concerns of investors, the World Bank reduced its forecast of economic growth for China after a recent wave of poor data which showed moderating growth.

ICE Brent crude oil prices for delivery in July dropped by $2.85 to reach $105.56 per barrel following its lowest in the session of $105.39 per barrel.

U.S. current crude oil prices for delivery in July ended at $89.90 per barrel, a drop of $1.95. That is the lowest close for the front-month crude price since the 21st of October. Both the U.S. and Brent fell to about 23 on the relative strength index in 14 days. That is way below level 30 which is usually seen as oversold.

Slight improvements were seen in trading volumes which were light in the early parts of the week. As such, the activity of Brent finished to the average U.S. crude trade in thirty days to around 17% lower to that level.

By: Chris Termeer