Oil Prices Fall

September Brent futures have demonstrated a sharp drop on the ICE Exchange in London, dropping below $45 a barrel down to $44.95. Thus, they returned to the minimum levels of May this year.

According to experts interviewed by ‘Vestnik Kavkaza’, the reduction is due to traders’ desire to use high-price conditions to their advantage and collect profits. Associate professor at VSHKU RANHiGS and Senior researcher at the Russian Academy of Sciences, Ivan Kapitonov, was one of the first who draw attention to this fact.

"They are selling off the oil that has been accumulated. Using the high pricses, traders who bought oil at low prices decided to decrease volumes, fixing their advantage. We will regularly see similar price changes, until the accumulated amount of oil is sold off. The seasonal factor also influences the situation. One way or another, the demand goes down in summer. It also negatively affects prices," he said.

The expert believes that prices will bounce back. "In future, the oil price will bounce back because neither suppliers nor consumers are satisfied with the current price. The oil price at the level of $50 a barrel will be beneficial for everybody. The today’s market goal is a price stabilization at the level of $50 per a barrel,’’ Ivan Kapitonov said, adding that we should not expect further decline in oil prices, since all excess supplies have already been sold.

A leading analyst at the National Energy Security Fund, a lector at the Financial University under the Government of the Russian Federation, Igor Yushkov, assumed that a decline in the oil prices has rather a psychological effect.

"It is not based on any fundamentals, but on the fact that players on the stock exchange who trade futures are in the habit of watching news and react to them in this way. In fact, nothing has changed. Even at the time when oil went up from $28 to over $50 the production exceeded the demand. There is an imbalance. And in fact, it is now almost exactly the same as it was a year ago,’’ the expert said.

The leading analyst at the National Energy Security Fund was confident that today the price of oil is affected by the short-term market factors. "The oil price of $45 is a short-term market factor, because there is no news which could have a global impact. The Fed hasn’t changed the rate, the war hasn’t started anywhere. In other words nothing happened,’’ the expert concluded.