Oil plummeted by 7%: why Brent and WTI face another drop

On November 2, oil futures experienced a massive sell-off: Brent lost 7.6%, WTI — 7.3%. The catalyst was talks between Iran and Qatari mediators, which fueled expectations of a conflict resolution and the restoration of supplies from the Middle East. As of today #BRENT is trading around $104.66, #WTI at $96.26 per barrel.

Why oil remains under pressure

At the end of October, Brent reached its highest levels in six months amid fears of a new escalation of the conflict. These negotiations changed that sentiment and became a reason for reducing positions opened in anticipation of further oil price increases.

There has been no diplomatic breakthrough yet, but contacts continue. The prospect of more stable exports reduces buyers' willingness to pay for the threat of shortages. According to analysts at FreshForex, the reduction in this premium is currently creating the main downward pressure on the market.

Reports of a US strike on Iran's Kish Island on the morning of November 3 triggered only a slight initial rise in quotes relative to the previous crash. Geopolitical news has not yet returned strength to the market.

OPEC+ also failed to provide buyers with a new argument: on November 2, seven agreement members maintained their September target production levels for December without additional cuts. Maintaining the previous restrictions proved insufficient to counter expectations of improved supply.

Cheaper oil supports the European economy

Falling oil prices also affect other trading instruments. For European businesses, it means easing pressure on transportation and production costs. Through this channel, cheaper energy creates fundamental support for #DAX30.

For EURUSD a favorable factor is the decrease in the cost of energy imports for the eurozone. Thus, falling oil improves conditions for the European economy, although its impact on currencies and stocks materializes alongside other market factors.

According to analysts at FreshForex, the combination of fundamental factors and the current price structure support the continuation of the decline in #BRENT and #WTI. Negotiations are weakening geopolitical price support, and the decision by seven OPEC+ members did not add any new supply constraints.

For #BRENT's next downside target is $103.00, followed by $100.00. For #WTI analysts highlight $95.00 and then $94.00. The weak recovery after the sharp drop maintains sellers' advantage.