These 5 factors may drive down oil prices

Global oil prices have fallen by about a quarter in the past 40 days.

The global benchmark, Brent crude, plunged 6.6 percent to an eight-month low of $65 a barrel on Wednesday. The West Texas Intermediate (WTI) was hit harder, dropping 7 percent to less than $55, registering the worst daily decline in over three years.

Argaam has compiled a list of reasons that may impact oil prices going forward.

1) OPEC output on rise

Total crude production by the Organization of the Petroleum Exporting Countries (OPEC) rose by 127,000 barrels per day (bdp) to average 32.90 million barrels per day (mbd) in October, the 15-nation oil producer group said in its November report.

Saudi Arabia raised its output by 127,000 bpd to 10.630 mbd in October, according to secondary sources. The direct communication figures showed the Kingdom increased production by 141,000 bpd to 10.642 mbd last month.

The UAE added 142,000 bpd to reach 3.16 mbd, the report said, quoting secondary sources.

2) Iran oil exemption

The United States has granted temporary exemptions to eight countries, allowing them to continue buying Iranian oil, despite imposing sanctions on Iran’s energy sector from Nov. 4.

China, India, South Korea, Italy, Greece, Japan, Taiwan and Turkey have received a six-month waiver.

3) Trump pushes for lower prices

US President Donald Trump has been pushing for lower oil prices for a long time and tweeted last week calling for OPEC to refrain from lowering production.

"Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!" he said in a tweet.

Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!

— Donald J. Trump (@realDonaldTrump) November 12, 2018

However, Saudi Arabia's Energy Minister Khalid Al-Falih has said that Saudi Aramco will reduce its December allocations to customers by about 500,000 bpd compared to November.

4) Rising US oil supply 

US crude oil supply is expected to average 12.1 mbd next year, as production in the country rises faster than previously anticipated, the Energy Information Administration (EIA) said in a report.

Crude output is expected to cross the 12 mbd mark in the second quarter of 2019, compared with previous expectations that this level would be reached in Q4 2019, it added.

5) IEA forecasts higher supply

Global oil supply will outpace demand throughout 2019, the International Energy Agency (IEA) said in its World Energy Outlook 2018 report.

Oil supply has increased sharply with gains in the Middle East, Russia, and the US more than compensating for declines in production in Iran and Venezuela.

The higher output, in combination with Iranian sanctions waivers issued by the US and steady demand growth, implies a stock build in Q4 2018 of 700,000 bpd.