Price of oil edged lower on the last Friday

6 years ago forexsimulation 0

There has been huge chaos in the energy field in the last year as the price of oil and coal was drastically rallying down in the global market. Most of the energy field researchers were worrying about the strong bearish pressure in the global market as the price oil and coal kept dropping in the market. The Chinese government took the first step to bring stability in the energy field by imposing the 275-day working policy in the coal mine workers. Since the working period of the coal mine workers were reduced to 257 days the production was also reduced to a great extent causing a tighter supply of coking coal in the global world. This caused the price of coking coal rallied higher in the global market within a very short time. After that, the OPEC came out with their oil cap production cap policy in their last meeting in order to stabilize the falling price of oil. Such a drastic event from the OPEC leaders was not seen by the global market since 2008.Upon the declarations of the oil cut policy in the global market, the price of oil found some solid ground and started its bullish correction in the market.

The sharp decline in the price oil: Most of the leading oil investors were thinking that the price of oil will rally hard in the global market due to oil cap production. The policy was supposed to effective from the very beginning of this New Year but some of the leading oil producing countries in the global world are still producing a huge amount of oil and fueling the bears in the market. In the last Friday, the price of crude well went down by 0.20% and traded at $53.65.On the other side, the Brent oil dropped by 0.19% and traded at 56.78 $.Since the dollar is now of the most lucrative assets in the global economy most of the investors are buying the green bucks instead of oil. Most importantly the expert oil investors are in doubt about the agreement on 30th November 2016 as some of the leading oil producing countries is not adhering to the oil cap production rules imposed by the OPEC. Despite the uncertainty in the oil industry, the trading volume was relatively low in the global market in the early part of the year 2017.However, most of the economist researchers are thinking that the market will soon exhibit a strong level of volatility in the near future.

The sentiment of the leading oil producing countries: though most of the countries have appreciated OPEC oil cap production rules but very few have actually limited their production in the year 2017.Saudia Arabia being one of the leading oil producing countries in the world has limited their oil production to a certain extent to bring stability in the energy field. On the other hand, Russia is still producing their oil at the normal rate and they are still not showing any real sign of production cap in their current production. Most importantly the current oil production rate of Iraq is extremely high and the leaders from Baghdad have stated that they need more time to limit their current production of since their economy is greatly dependent upon the oil industry. Some of the leading researchers are saying that the price of oil will again tumble in the global market as the Iraq government has millions of barrel stored in on the ocean tankers and they might start selling their current stock in the energy market at any time. If they start selling their current stock then the supply line will dramatically increase and cause huge selling pressure in the financial market. Most importantly they current demand of oil is well below the ongoing supply so if we see an increment in the supply chain then the oil price will again collapse in the global market.

Prior gains in oil are at risk: The price of oil was drastically falling in the global market and found some solid support after the OPEC leaders implemented oil cap production in the market. Most of the oil investors went long and drove the price higher in the global market. In the eyes of trained professional such effect of price, driving is often known as post driving method where the market rally high on the basis of investors sentiment. Most importantly the FED have raised their interest rate on the basis of 25 points and this caused the U.S dollar surge higher in the global economy. A stronger dollar usually drives the price of oil down in the global market. The FED have proposed three rate hike in this year and if they manage to hike their interest rate at least two times then the price of oil will further fall in the global economy. But two rate hike by the FED will be extremely difficult as they need to caustically observe every single sector of their economy.

Summary: The oil investors found some hope after the OPEC oil cap production policy but now they are in doubt about its real effect in the global market. Most of the leading oil producing countries have appreciated OPEC decision to a great extent but very few of them have limited their current supply of oil in the global economy. If the current supply of oil is not reduced to 1.2 million barrels per day then the price of oil will again tumble in the ground creating a record low in the market.