As recently as late September, our publication was commenting on “Crude oil’s relentless march higher.”
About a week after that article was published, prices for front-month futures for WTI crude oil started a notable descent from its 2023 high of over $90 per barrel.
For much of October, crude oil markets struggled to assess the impact of the turmoil in the Middle East, trading in volatile spurts but remaining in the $80–$90 range.
November then saw a steady decline in prices to the current level in the low $70s.
FIGURE 1: WTI CRUDE OIL NEAR-MONTH FUTURES PRICE TREND FOR 2023
Along with the falling price of oil, U.S. consumers are experiencing a welcome reduction in the retail price of gasoline at the pump.
FIGURE 2: RETAIL GASOLINE PRICE TREND PER GALLON OF REGULAR (2018–2023)
What has been driving the decline in crude oil and gas prices?
With heightened tensions in the Middle East and the ongoing Ukraine-Russia conflict, the significant decrease in crude oil prices and gasoline seems counterintuitive on the surface.
Trading Economics provided this analysis for the week ending Dec. 8:
Reuters reported over the weekend on further issues regarding economic conditions in China, which is facing a deflationary environment and sagging demand among consumers in many areas. This adds to the pressure on global demand for crude oil:
FIGURE 3: CHINA’S DEFLATION CHALLENGE—CONSUMER PRICE INDEX
Sources: National Bureau of Statistics of China, YCharts
Industry experts review the backdrop for falling oil prices
CNN recently interviewed Jim Mitchell and Corey Stewart, oil analysts at LSEG, looking to “better understand the dynamics pushing down the price of oil.”
In the lengthy interview, several comments were highly relevant to current oil pricing:
The opinions expressed in this article are those of the author and the sources cited and do not necessarily represent the views of Proactive Advisor Magazine. This material is presented for educational purposes only.