Oil Prices Sudden Break Down Has Stunned Marketers. Have Oil Prices Reached A Bottom?
Third consecutive weekly drop in Oil prices
According to analysts, the recent slide in oil prices is starting to collapse. In the coming quarters, Analysts predict a more significant pickup.
Third consecutive weekly drop in Oil prices
Oil prices have been declining weekly since last week, and their third consecutive weekly drop marked the longest losing run this year. According to data, the benchmark posted a close of $72.33 on Wednesday, marking the lowest since December 2021.
Ed Morse, Citi’s Global Head of Commodities Research in a statement said that it feels like oil prices are at the bottom. In a statement, Morse said that they are more positive about the second and third quarters than in the first quarter.
The world is moving into a higher-demand season and markets are currently facing the impact of OPEC+’s recent production cuts. The oil cartel last month announced that it was slashing output by 1.16 million barrels per day.
On May 8, a bank wrote in a research report that said they expect prices to bottom out soon.
ANZ, financial services company, believes with global oil demand set to grow by 2 million barrels per day, the oil slump could bottom out soon keeping the market under-supplied throughout 2023.
Goldman Sachs has maintained its predictions for a higher crude oil price tag. Over the weekend, in a report, an investment bank stated that according to their forecast, Brent rises to $95 per barrel by December and $100 per barrel by April 2024 as they expect large deficits in H2.
Global benchmark Brent, on Monday, traded 1.74% higher at $76.61 a barrel. The U.S. West Texas futures stood at 1.92% at $72.71 per barrel.
Sharp decline in Oil prices
By last Friday, Brent had slipped 8% year-to-date. The benchmark on Wednesday, marking the lowest since December 2021, posted a close of $72.33.
Stock market impacted by Oil prices
Federal Reserve Bank of Cleveland Researchers examined the price of oil and the stock market. The prices discovered surprised many as there is little correlation between oil prices and the stock market.
Does the price of oil correlate with stock market prices?
Some factors that can offset changes in energy costs are industrial metals, wages, plastic, interest rates, and computer technology.
According to some economists, general stock price frequency increase on the expectation of increased money supply, independently of oil prices.
As a result of increased consumption prices might rise during an economic expansion. As a result of increased production prices might also fall.
Oil prices may affect certain sectors even though stock prices are commonly aggregated and lumped together. Transportation is the one industry that is particularly impacted by the oil price as it relies on petroleum as a key input.
The rise and fall of Stock prices are based on future intrinsic values, investor risk tolerances, corporate earnings reports, and a large number of other factors. It can be said the economy is too complicated to rely on a single commodity to drive all commercial activity.
How the US Economy is Impacted by Oil Prices?
The U.S. economy and stock market are immediately and negatively impacted by high oil prices according to some beliefs. By high oil prices Investment and job growth may be influenced
On the other hand, great transportation and production expenses are another effect of rising oil prices that affects both firms and consumers. For unconventional oil production, lower oil prices are bad but good for manufacturing and other industries where fuel costs are a major factor.
Oil prices and their direct relation with Transportation.
Oil price influences the price of other production and manufacturing across the United States. A drop in fuel prices would directly impact transportation. Due to low fuel prices, transportation costs will be lower and cheaper.
Many industrial chemicals are refined from oil. Lower oil prices benefit the manufacturing sector. But this belief is expected to change as the majority might be using green energy sources and electric vehicles, and companies might adopt the work-from-home policy.
