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15 Dec 2014
When will the oil price bottom out? – Malcolm Graham-Wood
FXStreet (Barcelona) - Independent Analyst, Malcolm Graham-Wood, notes that the demand and supply equation, coupled with UAE Energy Minister’s comments that OPEC will not change its policy ‘even at $40 a barrel’, has led to uncertainty regarding the bottom out price for oil.
Key Quotes
“Friday was another down day for a couple of reasons, economic commentators are now panicking about something different, viz is lower world economic growth the reason for the fall in the oil price. Well, its part of that funny old supply and demand equation that some of you must have been taught at some stage in your lives…The bigger question is when demand will pick up as a response to lower oil prices, now if they can answer that then things are falling into place. On the supply side, the Baker Hughes rig count, released on a Friday is about to have its moment in the sun as much as inventory stats have been lately. Last week the count fell by 29 rigs to 1546 making it the biggest decline in two years, interestingly almost all those rigs were in Texas.”
“Finally, the UAE Energy Minister added fuel to the flames by saying that Opec would not change its current policy ‘even at $40 a barrel’ so only a few weeks to wait then. The result of all this is to assume that even the finest of forecasters cannot tell anyone at what price the oil price is going to bottom out, only that we will know it when we see it which I doubt.”
Key Quotes
“Friday was another down day for a couple of reasons, economic commentators are now panicking about something different, viz is lower world economic growth the reason for the fall in the oil price. Well, its part of that funny old supply and demand equation that some of you must have been taught at some stage in your lives…The bigger question is when demand will pick up as a response to lower oil prices, now if they can answer that then things are falling into place. On the supply side, the Baker Hughes rig count, released on a Friday is about to have its moment in the sun as much as inventory stats have been lately. Last week the count fell by 29 rigs to 1546 making it the biggest decline in two years, interestingly almost all those rigs were in Texas.”
“Finally, the UAE Energy Minister added fuel to the flames by saying that Opec would not change its current policy ‘even at $40 a barrel’ so only a few weeks to wait then. The result of all this is to assume that even the finest of forecasters cannot tell anyone at what price the oil price is going to bottom out, only that we will know it when we see it which I doubt.”