Why cheaper oil, the expert said the reasons for the collapse of prices
Crude oil grades WTI and Brent trading in November under constant selling pressure. Oil becomes cheaper under the influence of several factors, including the strong U.S. dollar, volatility and weakness in the stock market, escalating trade conflict between the US and China and rising global supply. Talk about the fact that the market was “fragile” and that there are problems with the inventory seemed to disappear overnight.
Instead, the emphasis has shifted to the possibility that the market was redistributed. Last week the dollar reached 16-month high against a basket of major currencies. This made crude oil more expensive to foreign buyers, reducing demand. Awesome sale on the US stock markets and increased volatility have also influenced oil prices.
The close relationship between inventory and prices may have led to the fact that hedge funds closed position due to margin requirements, which has further accelerated the sale. In October the question arose again about the escalation of a trade dispute between the United States and China. The international energy Agency predicts the demand reduction during the year due to the reduction of global economic growth. However, the reduction of stocks may keep prices at current levels.
Expensive energy is back and she is a danger to economic growth, say experts of the IEA. For developing countries, high international prices coincide with depreciating against the US dollar currency, so they can reduce consumption. Finally, as a bearish factor continued to accumulate in October, there are signs of oversupply.
According to the latest data, in October, Russia pumped 11.41 million barrels of oil, which corresponds to a 30-year high. The energy information administration of the USA reported that daily production exceeds 11 million barrels. Saudi Arabia produces up to 33.3 million barrels. These countries currently produce about one-third of daily global demand. Now the traders of the oil market rely on the excess supply. However, the market eventually will come to equilibrium when the professionals will be able to determine the actual scarcity on the world market from the Iranian sanctions. If the US and China will sign a trade agreement, will increase the demand, and prices can return to growth.
Forex broker FXOpen