End of an era of cheap oil

The speculative nature of the rally

According to the U.S. Department of Labor on consumer inflation for July, retail gasoline prices have fallen by 4.2%, despite the increase in oil prices. This negative correlation suggests speculative nature of the current rally in the crude oil market.

Critics of this thesis would argue that the price of natural gas by the end of last summer, also rose sharply. But many economists attribute this to the very limited supply of natural gas in the United States. Canada - the main source of gas for Americans - has significant potential for increasing the supply in the United Shtaty.Tehnicheskaya limited smuggle liquid gas greatly reduces the ability of Americans to get it from other countries.

As you can see, the price of natural gas in the medium term, technically peaked (built 5th bullish Elliott Wave). [1] Expected correction down gas prices in the range of 20% can carry along other energy markets, in including oil. These changes in energy prices should be a favorable factor for the world economy as a whole, as in the short term should have a positive impact on real household incomes and corporate profits.

But even with these factors, the oil futures market suggest that the longer-term, the price of Brent crude oil does not fall below $ 25-28 per barrel.

Speculative nature of the oil market is clearly manifested in the fact what factors they are driven.

Doubts about the ability of oil-exporting countries to reduce the hype in the market is not dictated by the reality of supply and demand: it is estimated that in June of this year the volume of oil supply exceeded demand by 2 million barrels a day.

As experts Petroleum Industry Research Foundation, the fundamentals suggest that the price of oil should now be about $ 30-35 per barrel.

Once again on the spare capacity

For the first time part of [2] it was noted that a number of factors pushing up the price of oil, are psychological in nature - a kind of phobia about what has not happened yet, but it can happen. Among them: a sharp decline in oil supply due to terrorist attacks on pipelines, the bankruptcy of "YUKOS", the political turmoil in Venezuela, the revolution in Nigeria, etc.

These fears inherent in the oil market is almost always, but the hallmark of the moment is the very low level of spare capacity, which can be put in place in the event of unforeseen circumstances. Given the fact that the capacity utilization of OPEC member countries closer to the maximum, the rumors about the possible reduction of oil supplies from a region of the world causing a stir in the commodity market and to stimulate the rise in prices to new records.

In its monthly report, OPEC said on August 18 that "perhaps the award of $ 10-15 in the recent rise in oil prices were due to extreme factors," such as "fear of oil supply disruptions due to geopolitical uncertainty, the maximum load of refining capacity and speculation" . "In the interest of all to the price of oil as soon as possible back to levels that are more closely related to the fundamentals" - as stated in the report.