Simply two weeks ago I wrote about falling oil costs. Fuel prices had crashed below the $2 mark. Oil was buying and selling under $50 a barrel for the primary time in months. The inflation risk which constructed all summer lengthy has disappeared. Now the massive concern is deflation and the worldwide economic slowdown.
Believe it or not, the global financial system is going to impression oil prices greater than the rest.
Oil producing nations and OPEC are concerned oil costs are too low. They’re making an attempt to artificially prop up costs by cutting provide. It does not matter how they play with provide. The economic slowdown is stifling demand.
Long term, oil costs are heading greater.
But for now, they’re going to trend decrease… much lower.
OPEC had a big meeting in Cairo this weekend. It was an unofficial occasion. But many traders assumed they’d announce another reduce in production. That’s why oil traded up from $forty nine to only over $fifty five last week.
There wasn’t a production reduce, however tension is apparently forming in the cartel.
The Saudi Oil Minister noted it was “too early” to make one other output minimize. Remember it was only some weeks in the past, in late October, when output was reduce by 1.5 million barrels a day.
But the Iranian Oil Minister had a unique take. He announced on state Television OPEC would look to chop manufacturing in December by 1 to 1.5 million barrels a day. He needed to “restore oil prices to $ninety per barrel.”
Oil costs traded lower on the news… significantly lower. Cuts in oil manufacturing will not matter for a while.
Why the disconnect?
It is the financial system. Economic news from the EuroZone, Great Britain, and China is miserable. Based on China Each day Information the Purchasing Managers’ Index (PMI) for China’s manufacturing sector dropped 5.Eight proportion factors in the course of the month.
It’s the bottom the Index has ever been since China’s National Bureau of Statistics started tracking it in 2005.
What’s it imply? It means China’s economy is slowing. Which means manufacturing is falling, development is falling, financial demand is wavering. One of the fastest rising customers of oil is now going through naphtha a decelerate… and which means oil consumption is slowing as effectively.
Clearly a world fall in demand is driving prices decrease… with falling demand OPECs production cuts will do little to stem the fall of oil.
Now before we throw OPEC fully underneath the bus, let’s look on the US. In accordance with World Oil’s November journal September oil production here in the US was down as well. Total production fell 17%, partially because of hurricanes, but additionally due to falling demand.
So, let’s take a look at your entire image. Global economies are slowing, even China. OPEC’s chopping manufacturing and probably will again. And, to top it off, US manufacturing is falling as well. Yet, oil costs are still falling.
All of this tells me oil’s heading lower quick-term. I feel oil will fall as little as $40 or maybe even $30 a barrel earlier than rebounding. If you want to profit from this fall, take a look at a few of the ETF’s tracking the price of oil. UltraShort Oil “> Creator Field Brian T Mikes has 1 articles online
Brian Mikes is the editor of the Dynamic Wealth Report, a free investment newsletter that provides investment ideas and information you can’t get from the mainstream investment press. Brian and his team bring a long time of Wall Avenue and Silicon Valley experience to help you discover worthwhile trading ideas you should use at present.
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