Infighting between OPEC members has resulted in quickly and consecutively falling crude oil prices throughout the last many sessions, with popular benchmarks Brent and WTI both suffering drastic drops. Stiff competition due to unrestricted output has driven the price of oil down to near decade lows, illustrated by Brent and WTI, which have recorded prices per barrel falling to mid - $30 levels. Brent sunk to below $37.00 before recovering slightly after reopening today’s session at $37.90, while trends in WTI ran parallel, displaying prices under $35.00 briefly, down from $35.66 the session prior. One of the more troublesome OPEC constituents has proven to be Iran, whose Deputy Oil Minister recently said there is no chance of tightening oil production levels in the future. Ever since the first iteration of this announcement, the Brent has experienced daily drops. Iran is trying to regain market share after the recent years of heavy sanctions on oil exports, and have even secured customers for when sanctions officially evaporate in January.
OPEC’s hyperbole is focused both inward and outward. While constituents like Saudi Arabia resolve to remain one of the more powerful oil-producing countries in the group, these policies are also aimed at foreign competition with higher production costs in Canada and the United States. Further trends that illustrate an unbalanced supply and demand equation is the sizable gains in Chinese refining capacity. Monthly industrial production that rose by 6.20% according to the latest report has been linked to the uptick in Chinese refining due to the end of seasonal maintenance and refining output hitting its highest levels on record. The end of pressure on energy prices will not come until the end of next year, it is estimated, as the supply glut is driven further due to continuing overproduction, storage constraints, and above trend refinery output in the face of low global demand. Though the price of oil remains a large concern for all major economies, this wrench in the machinery should not prevent a potential interest rate hike in the United States.