Why the price of oil has fallen by a quarter

Почему цены на нефть обвалились на четверть

Oil prices fell almost continuously from the beginning of October

Oil production is growing in the world, despite the sanctions against Iran. Experts predict the growth in oil demand until 2040.

Oil prices this week plummeted. For nearly half a month the cost of Brent crude oil fell by 15 percent. This rapid decline in the market was not celebrated in 2015.

The rapid decline in the cost of oil is currently causing concern about the weakness of the economy as a whole. In 2015 the fall in oil prices led to a decline in stock prices. Корреспондент.net tells details.

 

Oil prices have fallen by a quarter

Quotes Brent fell almost continuously from the beginning of October. Maximum values achieved on October 2, 86,74 per barrel at the moment fell to 64,61 per barrel on 14 November. This day was the peak of sales, prices were down seven percent.

November 15, the oil came to a rise and is now trading at 67 dollars per barrel Brent.

Similar dynamics is observed in WTI, which is focused on the American market. It was trading at around $ 56 per barrel – more than 25 percent below the peak a month ago. Now WTI is trading above $ 57 per barrel.

Both oil benchmarks have lost $ 20 since the beginning of October. As a percentage of Brent crude is now at 23% below the October peak, WTI rose by 26 per cent below.

The reasons for the collapse of cost of oil

The drop in oil prices was caused by coincidence of several causes, which are in the plane, how macroeconomics and geopolitics, as well as financial speculation.

First, such a fall in prices caused by economic slowdown and reduced demand forecasts of oil. 13 November, OPEC in its monthly report cut the forecast for growth in global oil consumption in 2019, noting that the proposal would grow faster than demand.

Second, unexpectedly affected the smooth introduction of US sanctions against Iran’s oil sector, which constitutes 3.5 per cent of world production. On 5 November, the Washington fully restored restrictions taken in 2015.

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The US has argued that to achieve the actual zero Iranian oil exports. But in the end, exceptions were made: eight countries were allowed to buy Iranian oil in six months.

Third, the market expects the introduction of new oil infrastructure in the US – the construction of boreholes, pipelines for pumping oil for export from the Gulf of Mexico. In addition, with record speed oil pump Aravia well as Saudi and Russia.

Fourth, speculative investors sharply reduced bets on higher prices. So, for the week ending November 6, hedge funds reduced their net long position (the difference between interest rates on growth rates and lower prices) of futures and options on WTI crude oil at 18% and Brent by 15 percent.

 

The demand for oil will increase until 2040

Despite the growing demand for renewable energy sources, oil and gas will remain major energy resources for at least another 20 years, according to a report by the International energy Agency.

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Energy demand by 2040 will grow by a quarter, but provided a more efficient consumption. If improvements in this area will not occur, the demand for energy will double, according to the forecast of the Agency.

Demand will grow mainly in developing countries like India. In the US, it will not change in Europe and Japan and all will be reduced.

Почему цены на нефть обвалились на четверть
The decline in demand for oil and gas will begin in 2040-ies / Getty

So, Asia will have 80 percent of the new demand for oil, half of gas and nearly 100 percent of coal and nuclear power. In the end, the share of trade in oil and gas, per region, will grow from one-half to two-thirds, analysts said.

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“The world is moving to a new system, the cost of solar and wind energy decreases as the oil has risen again, increasing the share of final consumption of electricity,” the report notes.

 

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