Investment Advice Santa Rosa – WHAT’S FUELING THE DROP IN OIL PRICES?

December 30th, 2014 → 11:03 pm @ // No Comments

How long will it last? Who wins & loses from it?

On the New York Mercantile Exchange, a barrel of light sweet crude is currently worth well under $60. Prices have dropped more than 25% in a month and almost 45% year-over-year. What is behind this freefall? How long will prices keep dropping, and who does this development hurt and benefit?

Oil prices haven’t cratered simply because of lessening demand. Make no mistake, waning demand is a major factor – and in its latest 2015 forecast, the International Energy Agency projected global demand for crude weakening further. But this is just part of the story.

Saudi Arabia has made a punitive political move. It is the big player among OPEC nations, and it sees no point in thinning the crude supply glut. The longer it lasts, the more pressure it can put on two of its biggest competitors – Iran and Russia.

Saudi Arabia has long feared Iran’s potential to develop nuclear weaponry, and if there’s too much oil on the market, the economy of Iran – which is extremely dependent on oil – could very well tank. Iran’s currency reserves are diminishing to the point where it needs oil prices up at the …Read More

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