23 Dec 2014
Why have oil prices fallen so sharply relative to earlier in the year? - Rabobank
FXStreet (Barcelona) - The Rabobank Research Team explains the major reason behind oil price fall, noting that an increase in US output and slowing global demand due to anticipated lower growth in EM were the major culprits.
Key Quotes
“The recent fall in oil prices that really gathered pace at the start of October caught most of the market off-guard. Prior to this move, most analysts were calling for oil prices to move higher on the back of rising tensions in the Middle East and Russia, and if they were calling for lower prices, forecasts tended to point to a small decline over a reasonably long period of time.”
“Brent oil actually stood north of USD 115 in June, with the front futures contract printing an intraday high for the year of USD 115.71 on 19th June which was the highest price since early August 2011.”
“The fall in oil prices has occurred in a number of phases driven by different factors but to summarise, we view most of the move as a result of structural oversupply largely driven by the rapid rise in US output. This was exacerbated by slowing demand largely driven by expectations of lower growth in the emerging market world, and finally a surge in downside momentum is likely to have triggered speculator selling as momentum driven accounts jumped on the move lower.”
Key Quotes
“The recent fall in oil prices that really gathered pace at the start of October caught most of the market off-guard. Prior to this move, most analysts were calling for oil prices to move higher on the back of rising tensions in the Middle East and Russia, and if they were calling for lower prices, forecasts tended to point to a small decline over a reasonably long period of time.”
“Brent oil actually stood north of USD 115 in June, with the front futures contract printing an intraday high for the year of USD 115.71 on 19th June which was the highest price since early August 2011.”
“The fall in oil prices has occurred in a number of phases driven by different factors but to summarise, we view most of the move as a result of structural oversupply largely driven by the rapid rise in US output. This was exacerbated by slowing demand largely driven by expectations of lower growth in the emerging market world, and finally a surge in downside momentum is likely to have triggered speculator selling as momentum driven accounts jumped on the move lower.”