International oil prices are currently at around the lowest level in 2019. When the market closed Wednesday, the benchmark oil contract, the Brent front month, had dropped to 59.97 USD/bbl, and it is the first time since January that we see the oil price fall below 60 USD/bbl. The price level has dropped by almost 20 % in less than a month.
The big price drop seen over the last few weeks is primarily attributed to the insecurity caused by Donald Trump’s trade wars. Trump has a long-lasting conflict with especially China, but the EU countries and Mexico are also on the US President’s radar in regards to tariffs, if the countries do not accept new American trade deals. The trade wars have caused experts to lower their growth expectations for the global economy during the next years, and this affects the oil market as well. Tuesday, the US Energy Information Association lowered it’s expectation to oil demand in 2019, and the market responded to this with further losses.
Apart from the demand concerns, the recent losses on the market are related to continuously high production in the US. The US inventories are very high at the moment due to the country’s shale oil boom, and the total inventory level in the country is currently 485.5 million barrels, 8 % above average for this time of the year.
During the coming months, focus on the market will be on OPEC and Russia, who are set to negotiate a potential prolonging of the countries’ deal to reduce output.