Oil's Slippery Slope

The NYMEX nearby futures price of a barrel of crude oil peaked this year at $93.68 on September 27. Notwithstanding the war that started between Israel and Hamas on October 7, the price is down $16.27 from that peak to $77.42. That’s even though Saudi Arabia and Russia reduced their exports during the summer and maintained their cuts through yearend. One reason for this development is that US crude oil field production is back at record highs (chart).

Another reason is that the global economy remains weak. For example, China’s October merchandise trade data today showed that while imports rose 5.8% y/y, exports fell 4.5% over the same period. In fact, both have been relatively flat since early 2022 (chart). Japan’s industrial production fell in September (-3.7% y/y) and also has been flat since early 2022.