The past few weeks have seen a dramatic fall in crude oil prices – of around USD 10 per barrel. That’s despite on-going geopolitical tensions most notably in the Middle East.  So what’s changed?  

Saxo’s Ole Hansen says that following June’s violence in Iraq the oil price was driven higher as speculative interest increased. This resulted in record prices  in both Brent and WTI. But by July these worries began to fade and the oil price drifted lower.

Hansen also points out that the US has continued to increase production leaving crude oil available for refineries in the US. It’s resulted in a rise in exported products from the States which has had a negative impact on countries like Nigeria which has struggled to sell its oil.

Hansen says that USD 102-104 per barrel is key for the Brent crude market and WTI resistance is USD 100 per barrel. He warns that geopolitical risk could flare up again building a USD 5-10 premium into the prices. But even though the market is weak, Hansen doesn’t think there will be much further weakness.