18:16 GMT +305 December 2019
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    Khaled al Otaiby, an official of the Saudi oil company Aramco watches progress at a rig at the al-Howta oil field.

    Oil Prices Drop Over China Weak Economic Outlook Not Middle-Eastern Crises

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    Global oil prices are sliding downward primarily due to a weak economic outlook in key commodity consuming countries, such as China, whereas the mounting political tensions in the Middle East are unlikely to boost the demand, experts told Sputnik Wednesday.

    MOSCOW (Sputnik) – On Tuesday, US West Texas Intermediate (WTI) crude futures briefly tumbled below $30 per barrel for the first time since December 2003 amid the investors’ concerns about global overproduction.

    "The weak economic outlook in major commodity consuming countries like China, South Korea, etc. will likely place greater downward pressure on prices due to a lack of demand. This lack of demand, in my opinion, will negate any short-term price hikes resulting from rising tensions in the Middle East," Friedbert Pfluger, the director of the European Centre for Energy and Resource Security at King's College, London, stated.

    This is why, there was no price increase over the past year despite Iran being excluded from the market and tensions in the Middle East, he outlined.

    "The oversupply of the market has mitigated price fluctuations based on political risk factors. Therefore, the structural production and demand factors play a much larger role than volatility would if the market were much tighter," another expert, an energy and Middle East scholar at the University of Oxford, told Sputnik.

    According to Justin Dargin, political risk factors only play a significant role when supply and demand are quite balanced.

    "However, the fact that Saudi Arabia has not reduced output has hindered investment in North American shale oil production and initiated a price war with Iran," Dargin noted.

    The recent standoff between Tehran and Riyadh over January 2 execution of a Shiite cleric Nimr al-Nimr, has sparked speculations on a possible rise in oil prices, however, a direct military conflict is still refuted as a likely scenario by some experts, including Michael Klare, a peace and world security studies professor at Hampshire College, interviewed by Sputnik.

    Oil plunge has also triggered growing concern that it would put US oil producers on the brink of bankruptcy. Three major US banking and financial services corporations, Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc., forecast the price of oil to crash through the $30 threshold and into a $20-notch due to China’s slowdown and the US currency’s strengthening, among other reasons for the oil glut.

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