US Crude Oil Prices Suffer Due To Inventory Surplus

Take a look at how the crude oil price movements are in the US at the moment that reflects a slowing down of demand across the globe.

Those who look forward to trading in crude oil are treading the market hesitantly these days. In WTI crude oil there was a fall, which was 61% that was lower compared to the levels reached on February 11th. This was a fall that was mind numbing to most traders. The last few quarters there have been discussions as to why crude oil prices are likely to stagnate. The oil prices have risen over the last month though. The fate has been different for different crude oil indexes. The main test is the performance against the 200 day moving average. If the lower levels of February are retested, the wild market will look simple in comparison. You can Check This Article Stock Market Rally To Get Affected By A Slowing Economy, here.

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Crude oil price movements

The crude oil prices are also dependent on the dollar strength and in which direction it will move. The crude oil prices are inversely correlated to the movements of the dollar. The move is higher in crude oil but aligned to the fall of the US dollar since the month of October. This week, however, sees a renewed focus on strengthening of the US dollar. Several rate hikes are being discussed that will take place in 2016. If that is the case, crude oil will not see much gain.

As per last Wednesday levels, the 200 day moving average has been sitting below the rate of $42 per barrel. It is assumed that 200 DMA will hold strong. Hence, the downturn in oil prices is expected to continue. The earnings of the oil producing companies have come down in comparison to the levels reached in recent years. For that reason, many companies have decommissioned two thirds of the rigs owned. They have also cut down on the investments made in production and exploration initiatives. Smaller ventures have gone corrupt as well, leading to 250,000 workers in the oil industry losing their jobs.

Industry trends

All this is happening due to fall in the price of oil, which is around seventy percent from the 2014 levels. Even though prices have recovered, but barrel prices continue to sink as a glut has come into this industry. It is also due to Iran having become a player in the oil market. The country was allowed to start selling oil in the international market in return for restricting its work on nuclear power development. If you ask people of the industry, they are not optimistic about prices coming back to levels like 90 or 100 dollars a barrel that used to be in the last decade.

If you look at the international benchmark for crude oil, Brent crude, it has been trading at the price of $41 per barrel as of Friday. The question that follows is why this has been happening. One of the chief importers of crude oil is US. As their domestic production has doubled over the last couple of years, they have pushed out oil imports. Hence, the same exporters are trying to find ground in Asian markets. Hence, oil prices are going down. Exports and oil production from countries like Iraq and Canada has also been rising.


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