From mid-2014 until today the price of crude oil fell from over $ 100 per barrel to $ 55, and the question that logically comes is whether these levels of price are the bottom of the current cycle. In strong downward trend since June last year till January this year, the price has fallen about 59%.
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However, since then the market has changed. Since the end of January, oil prices began with periodic oscillation that is balanced. The absence of a greater threat to Middle Eastern stocks, with good coverage of global demand, in the next few years it limits the ability of future intensive growth of oil price. It is now quite clear intention of Saudi Arabia to maintain market share and that reduction of production will leave to those producers whose production costs are higher. The strategy of maintaining market share of Saudi Arabia turned out to be not only connected to the oil market, but also for the global energy market. Keeping the price of oil relatively low, it slows the transition to renewable energy sources whose costs are much higher, and that way Saudi Arabia leaves more time to diversify its economy.
Despite the fact that the United States continued to produce much more oil than they can consume, the price of crude oil recovered in last month. However, the market is clear that the sharp decline in US oil rigs in the past few months will lead to a decrease in production. The production cut will coincide with the seasonal increase in demand which is likely to lead to a reduction in the current record-high inventories in the United States.
'Looking at the medium term, the ratio of global supply and demand remained stable with economic reports that are more prone to declining prices, but because of the situation in the US market, it would be too risky now to expect a drop in prices, at least until it is corrected up to 60 dollars per barrel ' said in Lider Forex.
The market has already experienced the lowest levels of prices for Brent and WTI oil but still there are a few factors that call for caution. Reports, when it comes to the US oil market, do not support the growth of prices, gasoline inventories rose by 26% in the past year and currently are around 82 million barrels, a record high value, and Cushing (fuel storage in Oklahoma) uses 80% its capacity. Cushing is also the center of contracting the New York mercantile exchange rates (NYME) for WTI oil.
"We are also expecting the OPEC meeting which is scheduled for 5th June, who will discuss the possible reduction of production quotas. If production is kept at present levels it is difficult to expect significant growth rates in the future 'said in Lider Forex.