Why is oil falling in price? This question is of concern to many experts, since the cost of fuel in the international market leaves its mark on the economy of most countries of the world, especially on the Russian one. From September 2014 to March 2015, an active drop in fuel was observed. After a lull, the price went down again. If we consider the situation from the point of view of theory, then a natural resource belonging to the category of exhaustible resources should go up from year to year. But due to a certain combination of circumstances, the price of fuel on exchange markets fell under the influence of politics.
The situation
A detailed assessment of the market situation will help to understand why oil is falling. In June 2014, nothing boded ill, and the price per barrel of “black gold” reached $ 115. Most analysts were confident that at the end of 2014 the price would close at around $ 110. Even state analysts did not doubt such a development of events, since the cost of fuel in the amount of $ 100 was included in the budget of Russia.
Contrary to forecasts, over the next 6 months, all market participants had the opportunity to observe a colossal drop in fuel. Charts reached a two-year low and confidently moved to the 2008 figures. The minimum was reached in February at around 47.09 dollars. Despite the fact that OPEC countries proudly stated that they were not afraid of a reduction in fuel up to $ 10 per barrel, the market was not allowed to move below the mentioned mark. So, starting in February 2015, the reverse growth of raw materials started. Today, the price of a barrel of oil is $ 63.69.
Forecasts, Forecasts
A couple of months ago, the leadership of many states clutched their heads, puzzling themselves with the question of why the price of oil is falling. The situation did not promise anything good, as quotes were constantly rolling down. Experts, understanding the situation, constantly insisted that nothing serious was happening.
In the winter of 2015, there was talk that the situation would stabilize by the beginning of summer. A 40% drop in fuel per year is not comparable to a global 75% drop during the 2008 crisis.
The OPEC meeting in early spring provided a partial answer to the question of why oil is falling. It's simple: supply has begun to exaggerate demand. Despite the fact that the situation should not have changed before the next meeting of states, which is scheduled for June 2015, global market participants could observe a positive rollback in fuel prices by about 20%. We can say that the pressure on fuel from political factors has slightly decreased, and the forecast for an increase in the cost of a barrel to $ 65 by the end of 2015 can be called quite real.
What caused the fall of the oil market?
The world oil market experts, analyzing the question of why oil is falling, came to the conclusion that several factors influenced the situation at the same time. Due to the saturation of 2014 with political and economic world events, it is problematic to single out one prerequisite for reducing quotes. We can talk about the beginning of the shale revolution in America. Since 2008, government fuel production has increased by 4 million barrels per day. It is worth saying that a little earlier it was the United States that was the largest consumer of “black gold”.
A change in the country's policy has led not only to an increase in the volume of fuel in the market, but also to a significant reduction in demand for it. We can talk about EU sanctions imposed on Russia. An important role in shaping the situation was played by the return to the oil market of Libya and Iran.
Oil drop: surprise or sound policy?
Even at the end of winter 2015, it was impossible to dispute the fact that oil prices are falling. The reasons for this phenomenon were found by experts in various aspects of the development of the world community. A very popular theory, according to which the decline in quotations, is an attempt by Saudi Arabia to oust the United States from the market. The country, as an industry leader, can have a significant impact on the market. Not wanting to lose its customers, preferring to maintain leadership, Saudi Arabia lowered prices to the level of cost of fuel production in America, which was accompanied by the closure of a number of companies in the United States. In particular, Venezuela did not support its partner and would prefer a reduction in production to a decrease in value.
What does the technical analysis of quotes say?
Considering the dynamics of the graph, the question of why oil is falling is relegated to the background. Experts are more interested in where the movement will be directed further.
At the end of the winter of 2015, speculators were guided by a powerful level of support, which stood at 36 dollars (2008 price). It was from him that purchases were planned. It was expected not just a touch, but good testing up to an indicator of 30 - 33 dollars, which was caused by a likely panic. But the situation played a little differently. The price reached the level of 47 dollars, turned around and went up. There is good growth potential at the moment. The most positive forecasts suggest that by the end of 2015, the price will close at $ 85 per barrel, or even more. I would like to say that large analytical agencies and world banks, in spite of the formed uptrend, are expecting another fuel trip down on the eve of growth to predicted values.
The new format of the commodity market
If just a few years ago, the answer to the question of why oil is falling was quite simple, today even short-term forecasts are very inaccurate. This is due to the fact that real goods turned into “paper” assets. Active trading in contracts and futures. The commodity volume of raw materials is only 5%. If we take into account the situation in the world with a weakened economy of many countries and with the problems of Russia, which is the most powerful supplier of fuel, we can explain the collapse of pricing.
Commodity economy of the Russian Federation: sensitivity to price changes in the international commodity market
Since 1999, the Russian economy has been actively developing. Since 2003, the state owes its well-being to the increase in world prices for energy carriers. Favorable circumstances helped pay off external debt and form a stabilization fund. A number of social problems went into oblivion. In the past, the advantage, and today the disadvantage is the country's direct dependence on raw materials and the inability to replenish the budget from other sectors of the economy.
In 2014, the budget was formed due to an increase in profits from the sale of energy by 1 trillion rubles. Without attention, there was a decrease in revenues from other sources by 300 billion rubles. This explains the government’s concern about this question: "Why is oil falling, is the dollar growing?"
