The nose dive in crude oil prices just does not appear to be relenting. This Wednesday, 4th February ’15, the loss in oil was something of quite a blow to what the four-session reversing rally was being witnessed after investors saw a record jump. The global fall has brought back the focus on the glut in crude oil prices. It was being speculated that the almost seven-month long slump was going to end because of the upward trend that added approximately 20% in the crude oil prices. But the crash on Wednesday has the investors feeling not so optimistic about things. The global market still has a high supply and low demand, which must be reversed if traders want to see an increase in prices.
Market Scenario in US
The US has increased output to its highest levels since 1982, and that is when they actually began to record this data. The crude oil stocks are now at 413.06 million barrels after last week’s addition of 6.3 million barrels, from the data collected by U.S. Energy Information Administration.
The distillate and gasoline stocks jumped at the Cushing delivery point in Oklahoma, US. There was also a rise by a staggering 2.5 million barrels in their contract for crude oil.
The fall of 8.7% is the biggest one-day fall in percentage value since the end of November of last year. The prices are now hovering around $48 per barrel which was a little over $52 per barrel on Monday’s close. But this is still slightly higher as compared to the trading price of $43 per barrel of last week – which is the lowest the prices had ever been in the past 6 years.
Predictions by Traders and Experts
Between the period of June 2014 and January 2015, the prices have seen a decrease in nothing short of sixty percent. Traders are double minded whether this slouch in the global crude prices will be enough to slow down the quickly growing demand in shale output in the US or whether there was still room for a further fall in prices of oil. Some of the experts are speculating the global oil market will continue to be over-supplied for another four to five months of this year; even though there is a stark contrast to this by the significant drop in the oil rigs of the US and the passing of budget cuts by a number of big energy companies. Traders are not in favor of a quick rise in the recovery of prices either, because it will not stop the steady spurt in US Shale projects.
Energy analysts in the London have also commented on this by also rebutting claims that prices will increase in the next few weeks. They are in-fact predicting another three-four months before the global prices begin to stabilize. The other factor that influenced the outlook of the prices, was the dollar’s highest-day of trading in a year, it has however stabilized now. The U.S. rise in a unit basket with other currencies was by almost 0.2% making all the commodities traded at dollars rates more expensive.
Low Demands From Countries
The prices in oil has been clouded by the low demand from various countries such as Germany and China as forecast by some Forex Technical Analysis. The European and Chinese industries have seen a dip in demand which has directly impacted their economies which have witnessed a slow growth. The reports released in some of the newspapers in China have not been too positive either with the data showing that in the past six months, the service sector in China is at its slowest pace.