Oil prices dropped sharply following the International Monetary Fund’s (IMF) downgrading of its forecast for global economic growth for both 2018 and 2019.
Prices had risen the day before as operators like ExxonMobil, the maker of complex greases like Mobil Unirex EP2, evacuated staff from offshore platforms in the Gulf of Mexico in advance of Hurricane Michael. More than a third of production from the Gulf is thought to have been lost as a result. Despite this tightening of supply, however, the downgraded IMF forecast has stoked fears that the future demand for oil may not be as strong as previously anticipated. The IMF cites trade wars and higher import tariffs as holding back economic growth.
The oil markets still seem to be driven by supply concerns, however. Although the renewed US sanctions on Iran do not take effect until November 4, the country’s oil exports are already dropping as customers seek alternative sources in preparation for that date. Despite efforts by Russia and Saudi Arabia to boost oil production, there are still fears of a possible shortage. In addition to the effect of sanctions on Iran, Venezuela has been experiencing dropping production, while countries like Libya and Nigeria are vulnerable to production disruption from militant attacks.
The general consensus among traders is that prices will remain in the high 80s in the medium term, with many trading houses estimating a lower limit of $65. Some even hint at the prospect of prices over $100 per barrel.