Crude prices dropped on Tuesday in Asia, with US benchmark West Texas Intermediate (WTI) for January delivery slipping 46 cents to $68.54 and Brent crude for January falling by 41 cents to $72.13 in afternoon trade.
According to research house Capital Economics, it looks as though there is a degree of calm returning to the markets. However, prices still remain volatile as the markets adjust after the 10 percent drop in oil prices last week.
On Monday WTI was up $2.85 from Friday, after falling down to $63.72, and Brent was up $2.39.
There is an oversupply of oil in the markets along with weak demand. As a result, oil prices were hit hard when the Organization of the Petroleum Exporting Countries (OPEC) announced that it would not be reducing oil production and maintain its output ceiling at 30 million barrels per day.
Saudi Arabia, the largest OPEC oil producer, was against calls from poorer members (such as Venezuela) to cut oil output.
According to The Economics Times, Capital Economics made the following comment referring to the Thanksgiving Holiday last week:
“The frenetic activity at the end of last week — notably the apparent free-fall in oil prices — was almost certainly exaggerated by the thin trading conditions due to the extended US holidays,”
American financial markets were not open on Thursday and trading hours were shortened on Friday.
Analysts say that dealers are eager to look at data from the US stockpiles report, which will be released Wednesday.