Investment Chart Kondratiev Wave

Investment Chart Kondratiev Wave

Wednesday, 6 June 2012

Oil prices can go down further

The oil production is rising pretty strongly while the demand is stabilising and even falling in the last months. Because of the disappointing growth in China and Europe the supply is now bigger than the demand. Because demand and supply curves for oil are very steep a small surplus of supply versus demand leads to big falls in prices (it Works also the other way around). So it is not very amazing that oil prices have fallen a lot in the past weeks.

Suddenly the fears for a supply disruption in Iran are postponed until after the elections in the US. Even the extra demand from post nuclear Japan are not helping anymore.

Especially Saudi Arabia is producing a lot more to sell some oil at high prices. They say they want to keep the oil prices above $100, but that is a too high price now the euro and other currencies are weak: in the eurozone one pays almost as much for oil in euro’s as in 2008 and that is not in line with the smaller Eurozone economies of today.
Also in Iraq the production is rising (but less than promised). This is made undone by lower production in Iran.
The oil inventories for trade in the US are starting to get too big and that is also not good for a higher oil price.

Also the positioning on futures markets is not positive: speculators are selling their too high positions.

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