Oil drops 6% its worst loss in a year

OPEC+ to maintain current production cuts till end of year

By Nadia Elbilassy | @Nadia Elbilassy | 5 October 2023

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  • Concerns about global demand & OPEC+ decision to maintain production cuts and not decrease further led to an intense sell off on oil prices.

  • Gold prices remained largely unchanged despite favourable shifts in treasury yields and the dollar's strength.

  • The dollar retreated slightly from its 107 peak.

Market watch of the day!

Oil prices on a slippery slope

Both benchmarks witnessed a sharp drop overnight to see their worst day in a year. WTI settled today near $81.50. After dropping from $88.52 to as low as $83.17. Meanwhile Brent fell $90 to $85 and hovers now near $83.65.

Many factors played a role in the drop, with the primary concern revolving around global demand, supply cuts and recession fears especially in Europe and in the US after a cooling labour market.

Another key reason was OPEC+ making no change in the production cuts. As Saudi Arabia confirmed its commitment to uphold a voluntary production cut of 1 million barrels per day (bpd) until the conclusion of 2023, while Russia pledged to continue a voluntary export limitation of 300,000 bpd until the end of December.

Gold prices staye flat

Although treasury yields saw a decrease and the dollar weakened, gold prices remained relatively stagnant around the $1821 level.

Spot gold dropped 4% in the previous week, the most significant drop since the nearly 6% plunge seen in the week ending June 11, 2021. In the current week, it appears to be heading for another 1.5% decrease.

The Dollar Index stood at 106.77, having reached an 11-month peak of 107.35 on Tuesday.