Oil prices fell to seven-month lows on Tuesday after news of increases in supply by several key producers, a trend that has undermined attempts by OPEC and others to support the market through reduced output.
As of 13:20 pm (MSK), the price of the futures contract for Brent crude oil with August delivery on London’s ICE fell by 1.81% ($0.85) to $46.06 per barrel for the first time since November 29, 2016.
The WTI crude futures contract for July fell by 1.81% ($0.8) to $42.93, its lowest since Nov. 14.
Both benchmarks are down more than 15 percent since late May, when the Organization of the Petroleum Exporting Countries, Russia and other producers extended limits on output until the end of March 2018, Reuters reported.
"Recent data points are not encouraging," Morgan Stanley analysts said in a note to clients. "Identifiable oil inventories - both crude and product in the OECD, China and selected other non-OECD countries - increased at a rate of (about) 1 (million bpd) in Q1."
First Vice-Rector for International Cooperation and External Communications of Financial University under the Government of the Russian Federation, the founder and CEO of the national energy security Fund of Russia, Konstantin Simonov, speaking with the correspondent of Vestnik Kavkaza, recalled in the first place that oil prices are formed under the influence of a rather complex set of factors, not just the interaction between demand and supply.
"So we should not be surprised that the output cuts agreement was extended, but oil started to decline on the same day. The mood of financial speculators strongly affects the prices. It is well-known that the amount of money in the futures market exceeds the number of money in the market of commodity oil. And speculators do not yet believe that oil prices are able to increase in the medium term," the expert explained.
Among other factors, Simonov mentioned the increase in the US production, which was higher than expected, forecasts for OPEC and for Russia. "Therefore, we should not count on a serious increase in oil prices in the near future," he said.
In addition, according to the CEO of the national energy security Fund of Russia, the world oil industry has recently received less than $300 billion in investment. And sooner or later oil production in the world will decrease.
The First Vice-Rector for International Cooperation and External Communications of Financial University added that US President Donald Trump is interested in the growth of the industry. "Most likely, the price will be $45-55. On the other hand, if oil price declines in the short-term, then it will not be able to stay at a low level for a long time," Konstantin Simonov concluded.
