Article on Oil Price

Interesting Article on Oil Prices Trends. - Why Oil Prices Keep Falling?

This article provides a clear explanation on the decline of oil prices.

Key summary of this article:

1) Supply is increasing steadily due to shale oil and oil sands developments in USA and Canada respectively. There are also less supply disruption in Middle East region (i.e Libya). Furthermore, Saudi Arabia, one of the key members of OPEC is not willing to cut supply and lose market share. 

Source: International Energy Agency

2) Slowing demand in China and Europe. The slow down in China is becoming more apparent. While China might not suffer a hard landing, growth has tapered to 7.4%, lowest since 1990. Europe economy is not doing well and disinflation is a major problem. ECB is pull out every trick in the bag to prevent Europe from falling into deflation.

Implications: Oil prices will stay low unless there is a major supply disruption. While current oil prices will discourage more explorations in USA and Canada, existing supply will continue as CAPEX had already been committed.