Crude prices plummet to multi-year lows on supplies build-up, dollar rally

07-Oct-14

US benchmark WTI for November delivery slipped to US$89.6 at the beginning of this week. At the end of the previous week, prices slipped to US$90 for the first time since April 2013. Brent North Sea crude eased to US$91.9, a two-year low. Both Brent and New York contracts have shed about 15% in the past three months. This downtrend in oil prices can be attributed to a build-up in supplies as the dollar rallies in response to a strong US jobs report. As per the US Labor Department, 248,000 jobs were created in September pulling down unemployment rate to a 6 year low of 5.9%. Output continues to rise in the United States owing to oil shale extraction, while exports are on the rise in Russia, Libya and Kurdistan. Also, last week's price cut by Saudi Arabia - the Kingdom's fourth straight month-to defend its market share, suggests no likelihood of production cut any time soon. As per an analyst, merely the supply of US shale gas could meet global demand this year, and in the event of any reduction in production from OPEC countries, a bearish market is anticipated. Also depressing prices is the stronger dollar, that surged at the end of the previous week after the Labor Department said the US economy created 248,000 jobs in September and the jobless rate dipped to a six-year low of 5.9%.