Request a call back

Fall of Oil Prices Is Far Away from Completion

Physics seems like an abstract science for someone, but in some way gravitation may occur on financial markets, especially, to oil market. Everything that rapidly increases in some time also declines.


In August the prices abruptly increased, having got nearly 30% for 3 days. However, the same way market fell and the prices lost nearly third part. WTI oil is now trading for 46 dollars per barrel.


Such unjustified growth initially had factor of instability. Hedge funds got a great number of short futures positions on oil and their volumes reached extremums. Accordingly, as soon as fixation of profit on these positions began – the market got fever.


Character of such movement just accepts that fundamental factors of oil market remained without changes and vector of movement of oil showed downward direction. This year on the background of changes connected with mechanism of data collection evaluations of production of oil in the U.S were lowered. But on the background of worldwide production these numbers do not play significant role, taking into account that the real situation may not match the rated situation.


There are some gossips on the market that OPEC with the lead of Saudi Arabia is going to lower quotes on production. But it is doubtful that Saudi Arabia, beginning a big game on knockout, easily gives away its share of market and gets off the way.


Shale oil manufacturers in the U.S also became very strong and keep steadily their position, being supported by availability of capital market. Revision of expenditures and optimization of consumptions made this branch more stable and flexible to competitions. In June number of active drilling rigs stopped in tendency of reduction and even increased, but tendency did not get positive trend.


Other oil manufacturers, that are not members of OPEC cartel, are trying not to lag behind from the major ones and keep levels of production on high positions. According to investigations, countries outside of cartel may show this year intraday production on 58.1 million barrels. In July this forecast was only 57.5 million. However, even if Saudi Arabia observes success of production outside cartel and worldwide demand, it does not mean that reason of possible change in strategy lies in this observation. In July analysts expected that intraday worldwide demand of this year would be at the point of 94.1 million barrels, but further this forecast was revised on increase on 94.2 million.


On this background further perspective becomes more uncertain. China, the major consumer of oil, in 2014 has imported 12% of worldwide volume production. But problems in economic reduced appetites of Chinese economy and further level of demand traders call into the question.  Chinese problems also influence negatively the whole Asian region and oil demand, which is earlier was a third part of worldwide demand.


Manufacturers entered into fight for Asian oil consumption. On the background of rationalization of energy consumption in the Europe and self-sufficiency of the U.S. value of Asia in trading of energy is just increasing.