Brent crude dropped to $48.45 a barrel Tuesday, while WTI, the primary benchmark for U.S. oil prices, fell to $41.55 a barrel, according to investment advisory Seeking Alpha.
Crude oil prices fell to fresh lows Tuesday, “almost a third below their last peak in May as traders brace for lower refinery consumption after the summer, while weak global demand and high production fuel concerns about oversupply,” according to investment advisory Seeking Alpha.
Brent crude, considered by most analysts to be the global benchmark for oil prices, fell 0.6 percent to $48.45 a barrel during trading yesterday, while West Texas Intermediate (WTI) was trading down 0.8 percent at $41.55 per barrel. WTI is the primary benchmark for U.S. oil prices.
Seeking Alpha said analysts expect prices to continue to decline, as “data also shows speculators have taken huge bets on further falls and hedge funds have cut their net long holdings of Brent for a fourth straight week.”
U.S. economic growth has slowed in recent months and the stock market in China, the world’s largest consumer of energy products, has been taking a beating lately, further fueling fears of dwindling demand and global oversupply.
Lower crude prices decreases the amount people pay at the pump and economists say U.S. consumers tend to use that extra money to buy other goods and services, which helps to grow the economy. In the transportation industry, lower fuel prices should translate to lower operating costs for carriers and lower rates for shippers, though this has not always proven to be the case.
Meanwhile, the Commerce Department will soon allow the sale of U.S. crude oil to Mexico for the first time, according to reports from Reuters. The news outlet cited a senior Obama administration official, who said Commerce is “acting favorably on a number of applications” to export U.S. crude in exchange for Mexican oil imports.
The shipments will likely be restricted to lighter, high-quality U.S. shale oil, which would help Mexico’s aging refineries produce more premium fuels, and remain limited in terms of volumes. Under the deal, U.S. refiners would continue to receive heavy oil from Mexico, which is “a better match for them than the light oil coming from Texas and North Dakota,” Seeking Alpha said of the reports.
“Although limited in scope, the move toward freeing up trade will please U.S. oil producers such as Pioneer Natural Resources and ConocoPhillips, which say the restrictions force them to sell oil at below global market rates as shale oil boom created a glut of light crude,” added Reuters. “It may also add momentum to efforts mostly by Republicans to repeal what they see as a relic of the 1970s Arab oil embargo era and fears of energy insecurity.”
Oil prices slip again as U.S. increases trading with Mexico
