Why is the price of oil falling

As in the case of any market commodity, the price of oil depends on the global balance of supply and demand. In practice, oil quotes are influenced by a complex of factors, among them a group of political, economic, social and technological factors. The influence of speculation on the price dynamics cannot be ruled out. Recently, however, many governments have tightened control over such operations and have virtually wiped them out.

Factors determining oil prices


During 2013, the rise in oil prices slowed against the background of the active dynamics observed in recent years. In the first months of 2014, the cost of oil remains quite unstable, while it has a general tendency to decrease.The price of the OPEC oil basket today is $ 105.46 per barrel, whereas in 2008 it cost $ 140.73 per barrel.
Among the key factors that currently adversely affect the cost of oil, the following can be noted:
The unstable situation in the global economy leads to a drop in demand for non-oil.Despite the crisis in the United States and Europe, these countries showed relatively stable consumption of energy resources.
However, the main increase in demand until 2008 was in developing countries. In particular, China, India, Brazil, Latin America. Today, these countries are characterized by an economically unstable situation, as well as fiscal problems. This leads to a decrease (or stagnation) of energy consumption in them.
The gradual recovery from the crisis of the American economy entails the strengthening of the dollar. It also holds back the cost of energy.
Imbalance of supply and demand in the market, outpacing production growth. The decisive contribution to the growth of production belongs to Iran and Libya. In January 2014, the output of “black gold” in OPEC countries increased to 29.9 million barrels.
Increased reserves of unconventional energy resources (for example, shale gas and oil sands).
At the same time, a high oil load on leading economies, as well as positive statistics of industrial production in the USA, EU and China, have a supporting effect on the price of oil.Favorably on the level of oil prices affected the cold weather in the United States and Europe, which led to an increase in energy demand.

Oil price forecasts


The World Bank made negative predictions about the cost of all energy resources, including oil for 2014.According to the forecasts of the World Bank, the oil price in 2014 will show a negative trend in the amount of 1% and will reach 103.5 dollars per barrel.Negative forecasts are due to a drop in oil consumption in China, India, and also in the Gulf of Mexico. At the same time, global demand will grow, but at a slower pace than production. It is assumed that in 2016 the price of oil will fall below $ 100 per barrel.


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