The oil market is going through a phase of extreme volatility with Brent, Europe’s benchmark, falling to critical levels. Over the last few days, the oil price has been falling and continues to suffer major corrections, reaching a drop of over 4% this Tuesday, which has left Brent close to breaking a key support that could trigger further massive sell-offs.
The key factors behind the fall
The Brent crude oil has fallen to 74.2 dollars per barrel, a level not seen since December 2023. Among the factors behind this plunge are weakening oil demand in China, the possibility that OPEC may begin to withdraw production cuts, and somerumors of a price reduction by Saudi Arabia, amid an increase in production in America.
Analysts had expected oil to remain above $80 per barrel, driven by production disruptions in Libya and cuts in Iraq and Kazakhstan. However, the reality has been different, with the price of Brent piercing the $76 level, which has intensified selling by investors.
This drop in oil prices could ease pressure on central banks such as the Federal Reserve(Fed) and the European CentralBank (ECB), which are looking to lower interest rates. If crude oil continues to decline, financial institutions could act more confidently in their expansionary monetary policies.
Oil prices fall and risk a further decline
The uncertainty surrounding OPEC’ s ability to maintain cuts and the weakness of the Chinese market raise serious doubts about the recovery of world oil demand, which according to the International Energy Agency(IEA) should have recovered in the second half of the year. However, the lack of clarity on Chinese imports and the possible release of 2.2 million barrels per day in 2025 could continue to put pressure on prices.
From a technical point of view, Brent is close to breaking a crucial support in the zone of 72-74 dollars. Should this happen, experts warn that the price could drop to $55 per barrel, intensifying the correction in the market.
Investors are also watching for the recent“crossover of death,” a pattern that suggests further declines, where the 50-session moving average crosses below the 200-session average. This indicator reinforces the possibility of a bearish trend in the near term.
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Source: El Economista
Photo: Shutterstock
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