04.09.202015:02 Forex Analysis & Reviews: Oil correction may end soon

The decline in the price of crude oil which began a few days ago, continued on Friday. This may suggest a possible weekly decline in the value of the black gold.

According to analysts, there are now enough factors for a further reduction in oil prices. One of which is the traditional seasonal decline in demand for crude oil. Also, the situation with Iraq, which cannot fulfill its obligations under the agreement with OPEC to cut oil production.

At present, there is a decline in the demand for fuel in the US. According to the report from the Department of Energy, gasoline dropped to 8.78 million barrels last week, ended August 28. Previously it consolidated at around 9.16 million barrels.

However, market participants are more concerned about the situation with Iraq. It has already become clear that the state will not cope with the undertaken obligations. And this means that the country will not be able to compensate for the debt for the extraction of raw materials that have accumulated up to this point in two months (August and September). According to the Iraqi authorities, the state will need at least another two months to bring production to the standards prescribed by the agreement with OPEC. The reaction of the organization itself to this remains unknown, but this fact is unlikely to please the ministerial cabinet.

Nevertheless, investors attribute the increased volatility in the crude oil market to the gradually stabilizing condition of the greenback which hasn't shown any significant failures recently. Earlier, the value of dollar fell to its lowest levels, and its index in relation to a basket of six major world currencies sank to the lowest values for the last two years. Traditionally, the depreciation of the dollar is a factor supporting the oil market, and its strengthening leads to the opposite situation, which we are dealing righ now.

The price of Brent crude oil futures contracts for November delivery on the trading floor in London fell 0.77% or $0.34 on Friday, pushing it to $43.73 per barrel. It ended the previous trading session with a decline of 0.8% or $0.36.

The price of futures contracts for WTI crude oil for delivery in October on the electronic trading floor in New York also went down by 0.87% or $ 0.36, leaving its current value at $41.01 per barrel. It ended the previous trading session in the red zone with a decline of 0.34% or $ 0.14.

Market participants awaits the release of statistical data on changes in the US labor market on Friday. The results may affect the balance of power in the oil market. At the very least, it can become a catalyst for another reduction in the value of the dollar, which will be a support for black gold. However, there are practically no hopes that raw materials will quickly recoup its lost positions. Nevertheless, the fact that the price correction will not last too long will already delight investors.