Crude Oil Prices May Turn Lower As Market Risk Appetite Sours. There are various reasons for oil market volatility. One of them is the ever increasing demand for oil from various countries around the world. Another factor that drives up oil price is the rising threat of terror attack in various regions in the globe such as in Iraq, Nigeria and Egypt. With the US economy still floundering, there is also a fear of inflation in the US itself.
But all this does not mean that crude oil has become an irrelevant commodity. Rather it points to the fact that we need to find better ways of extracting crude oil which will in turn provide us with cheaper and affordable fuel solutions. It is a known fact that exploration of fossil fuels is very expensive and time consuming. In addition to this, government regulations over the extraction of crude oil have been tightened in an effort to control its prices. The best time to invest in crude oil is when the economy is recovering from recession and the risk of inflation is muted.
At the present time, crude oil accounts for about 80% of global energy output and is the cheapest commodity available. However, it has become quite costly over the past few years. It is estimated that the price of oil is about $75 per barrel. Inflation and soaring fuel costs have made it difficult for most people in the United States to enjoy consistent profitability. This in turn has resulted in an increased consumption of oil in countries like India, China, and Russia, which are emerging as major energy consumers.
Oil market analysts predict that oil prices may turn lower over the coming year. Experts believe that prices may stabilize at around the end of the current year or maybe even come down slightly. Some believe that prices may fall as low as the mid-2021 level. Speculation on the inflationary effect of falling oil prices has increased oil stocks in the stock market. Many large companies have taken a defensive stance and have refused to invest in the oil industry.
On the contrary, oil companies have taken a positive stance and are optimistic about the prospects of recovering from the current crisis. They have cut back on drilling, and refineries continue to operate despite a decline in commodity prices. Experts believe that a fall in oil prices may slow China’s economy. China is the largest producer of oil, accounting for around 10% of the world’s oil production. The slowing of China’s economy will have a negative impact on global economic stability.
Oil prices may turn lower if the US Federal Reserve keeps raising interest rates. If this happens, the price of oil will increase because the cost of borrowing will go up. This will make the cost of crude oil higher than before. Many investors believe that rising interest rates will force the Federal Reserve to keep the interest rates at their current low level.
Another factor that will affect oil prices is the slowing down of the Chinese economy. The country’s economy has been hit by years of stagnation and has been trying to deal with the problem of an excess supply of cheap goods. If China continues to devalue its currency, the cost of crude oil will go up, forcing oil producers to raise their prices.
Crude oil is a product which is produced under tight conditions and has to be stored in deep wells which are sometimes located in severe weather conditions. Many people use the petroleum products to generate heat; therefore, the rising prices are felt by the domestic users. However, the increasing demand for oil will boost the global economy and make it easier for the oil companies to extract more crude oil. There are many factors which will affect oil prices and the current trend suggests that oil prices may turn lower in time. Once the trend begins to reverse, the cost of crude oil may start shooting up again, so investors will need to take caution and invest accordingly.