Oil getting cheaper, we await price reduction in BiH

SARAJEVO, (Patria) - The price of a Brent barrel on the London Stock Exchange fell by 8 percent last week, to $65.18, the lowest level since April. On the American market, a barrel of WTI oil became cheaper by 9 percent, to $62.32, the lowest level since last summer.

Oil prices recorded a continuous decline for the seventh consecutive trading day on Friday, as more and more countries around the world face rising numbers of Covid-19 infections, leading them to restrict travel in an effort to curb the spread of the pandemic.

China has introduced stricter disinfection methods in its ports, causing congestion in the flow of goods, and, like the US, has introduced restrictions on the number of passengers on flights. Numerous other countries, including Australia, have restricted citizens' travel. Because of this, the demand for aviation fuel has weakened, after growing throughout the summer.

"With this kind of uncertainty, it is difficult to find a foothold for oil prices. Authorities are acting sharply to minimize outbreaks, and this directly threatens the demand for oil," points out John Kilduff, partner at Again Capital LLP.

Furthermore, the dollar exchange rate rose last week against a basket of the six most important world currencies to its highest level in nine months, as the Fed considers reducing monetary stimulus. Oil prices, on the other hand, are in inverse correlation with the dollar exchange rate, so when the American currency becomes more expensive, oil is more expensive for foreign buyers.

And while the delta variant of the coronavirus is pressuring demand, oil supply continues to grow. US production increased last week to 11.4 million barrels per day, and the number of new drilling rigs has also been increasing for the third week in a row, according to Baker Hughes. OPEC is also increasing its supply. Therefore, futures contracts, i.e., contracts for the delivery of oil in the coming months, are falling, which suggests that traders expect a good supply in the oil markets in the coming months.