The annual production of all petroleum producing countries had been growing steadily year-on-year with Brazil showing the steepest climb in the last five years. The production rates were kept on full steam ahead to meet the actual consumption demand, stock requirements, strategic reserves and speculators indulgence in market economy.
This led to the price increase which fueled investments in the deep water and advanced technologies for exploration and production. When economic climate changed with slow down in Europe, US, Japan which resulted in major slowdown in Chinese exports, resulting in drastic reduction of consumption by China as the major consumer. This caused speculators to exit the market as quickly as possible. Therefore drop in oil prices due to excess supply channels, is not a secret formula. This is a simple balancing of demand and supply curves once again after a boon period of five years. Oil price can not be blamed again for the woes of current economic trends, even though headlines of almost all news bulletins, start the day by putting the blame on low oil prices as the cause.
See the graphs below and predict the trend like a simple text book example.
What do you predict? Will the oil price go up and help the economy or economic growth will raise the demand for oil steadily and price of oil will remain steady for another year till 2017 in the US$35 to US$55 band?
Comments and discussion is welcome!