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The forecast of a warmer winter in the United States has put the brakes on the upswing driven by tight supply and global energy tightening.
Oil prices fell by US$2 after hitting a three-year high above US$86 per barrel on Thursday, as the forecast of a warm winter in the United States prevented a rebound driven by tight supply and global energy tightening.
According to a report issued by the National Oceanic and Atmospheric Administration on Thursday morning, winter weather in most parts of the United States is expected to be above average.
Bob Yawger, director of Mizuho Americas Energy Futures, said: “The report shows that the weather in the southern and eastern parts of the United States is drier and warmer, which is putting pressure on the complex.”
Brent crude oil fell by US$2.31 to US$83.51 after hitting an intraday high of US$86.10 at 11:37 AM Eastern Time (15:37 GMT), which is the highest level since October 2018. US West Texas Intermediate crude oil fell US$2.40 to US$81.02.
On Wednesday, when the U.S. Energy Information Administration reported tightening of crude oil and fuel inventories, prices rose and crude oil inventories in Cushing, Oklahoma fell to a three-year low.
Rystad Energy’s Louise Dickson said: “The trader who set the $86 threshold to sell has made some profit with this opportunity.” “As a result, oil prices have plummeted.”
The slow increase in supply in the Organization of the Petroleum Exporting Countries and its allies (collectively referred to as OPEC+) and the global coal and natural gas squeeze are pushing generators to switch to oil.
Oil is also under pressure from falling coal and natural gas prices. In China, coal prices fell by 11%, extending this week’s decline as Beijing hinted that it might intervene to cool the market.
“With the fall in coal and natural gas prices, the relative strength index technical indicators are still in the overbought area, and the possibility of a substantial but substantial drop in oil prices is rising,” said Jeffrey Halley, an analyst at brokerage OANDA. Despite this, some analysts still call for further increases in oil prices because OPEC+ may stick to its plan to gradually increase production, and demand is expected to reach the level before the coronavirus pandemic.
Rystad said that the outlook for the rest of the year is bullish. Giovanni Staunovo of UBS, the Swiss bank UBS, said in a report that he expects Brent crude oil to increase in December and March. The transaction price is $90.
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