Oil price for the week fell by 12%, investors are in panic
Just a week oil has fallen by 12%. With peak levels of October Brent lost almost a third. On Friday we saw that such a relaxation does not go unnoticed in global markets. Thus, the S&P500 closed last week at the lowest level since may.
Although in the medium term, such low quotations of “black gold” and spurring economic growth, yet the sharp falls cause a chain reaction, to pull down other risky assets. One after the other went down-stock prices energy sector, which in turn put pressure on stocks in General.
With this reaction we faced in 2014. As then, for “demonstrative” is based on a number of factors: the increase in production volumes, the slowdown in consumption growth and a tightening of monetary policy.
By the way, news from America and gave a start to the reduction of oil in October. The market is already considered to be overheated, but the mood of the fed “to raise rates above the neutral level,” returned the markets to the imbalance of supply and demand. Later the decline accelerated when the recession of Iran was not so strong and willing to take his share lined up in a long queue.
Today in the morning the oil quotes yet tried to climb above the important round levels: $60 for Brent and $50 WTI. However, at the moment, there are the same compelling reasons that would allow oil to regain its former position.
Judge for yourself: major producers continue to struggle for market share, increasing production; the key consuming regions – Europe, USA, Asia – slow growth; Central banks are in no hurry to abandon plans for policy tightening.
In fairness, we note that Powell from the fed talked about the possibility to pause in the “political tightening of belts”, and this has weakened the dollar, negatively affecting the profitability of U.S. debt securities.
Recall that in 2016, in addition to promises by OPEC and Russia to cut production to stabilize the market, have been taken action by the key global Central Banks. The fed, ECB and Bank of Japan took a softer stance in monetary policy, Asian countries have increased growth. Together, these factors are then turned the oil up. In the current situation such salutary factors which we don’t observe.