What Is actually Driving Oil Prices
Just two weeks ago I wrote about falling oil prices. Fuel costs had crashed below the $2 mark. Oil was trading below $50 a barrel for the primary time in months. The inflation threat which built all summer long has disappeared. Now the big concern is deflation and the global economic slowdown.
Imagine it or not, the global economic system goes to impression oil prices greater than anything else.
Oil producing nations and OPEC are concerned oil costs are too low. They’re attempting to artificially prop up prices by slicing supply. It does not matter how they play with supply. The economic slowdown is stifling demand.
Long run, oil costs are heading higher.
But for now, they’re going to trend lower… much lower.
OPEC had an enormous meeting in Cairo this weekend. It was an unofficial occasion. But many traders assumed they’d announce another reduce in manufacturing. That is why oil traded up from $forty nine to only over $55 last week.
There wasn’t a production cut, but tension is apparently forming in the cartel.
The Saudi Oil Minister noted it was “too early” to make one other output reduce. Remember it was just a few weeks in the past, in late October, when output was minimize by 1.5 million barrels a day.
But the Iranian Oil Minister had a distinct take. He announced on state Tv OPEC would look to cut production in December by 1 to 1.5 million barrels a day. He needed to “restore oil costs to $ninety per barrel.”
Oil costs traded lower on the information… considerably decrease. Cuts in oil production won’t matter for a while.
Why the disconnect
It’s the economic system. Economic news from the EuroZone, Nice Britain, and China is depressing. In response to China Each day Information the natural gas pipe pressure testing Purchasing Managers’ Index (PMI) for China’s manufacturing sector dropped 5.Eight proportion factors in the course of the month.
It is the bottom the Index has ever been since China’s Nationwide Bureau of Statistics started monitoring it in 2005.
What’s it mean It means China’s financial system is slowing. Meaning manufacturing is falling, growth is falling, economic demand is wavering. One of the quickest growing consumers of oil is now facing a decelerate… and which means oil consumption is slowing as nicely.
Clearly a world fall in demand is driving prices lower… with falling demand OPECs manufacturing cuts will do little to stem the fall of oil.
Now earlier than we throw OPEC solely underneath the bus, let’s look at the US. According to World Oil’s November journal September oil production here within the US was down as properly. Whole production fell 17%, partially due to hurricanes, but also because of falling demand.
So, let us take a look at the whole image. Global economies are slowing, even China. OPEC’s slicing manufacturing and doubtless will once more. And, to high it off, US manufacturing is falling as properly. But, oil costs are still falling.
All of this tells me oil’s heading decrease brief-term. I feel oil will fall as low as $40 or perhaps even $30 a barrel earlier than rebounding. If you want to revenue from this fall, look at among the ETF’s tracking the value of oil. UltraShort Oil “> Creator Box Brian T Mikes has 1 articles online
Brian Mikes is the editor of the Dynamic Wealth Report, a free investment publication that gives investment concepts and information you cannot get from the mainstream funding press. Brian and his staff convey many years of Wall Street and Silicon Valley experience that can assist you uncover worthwhile trading ideas you should utilize as we speak.
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