Crude oil pricing
continues to fall as both Brent and WTI are currently
trading approximately 5% below levels observed on September
1 and 15% below mid-June trading values. A rejuvenated
U.S. dollar, increased supply and reduced global demand all
have contributed to the current market dynamic.
U.S. dollar has gained strength due to sustained evidence of
an improving economy. The U.S. dollar and crude
commodities trade inversely to each other with a stronger
dollar making crude commodities more expensive to purchase.
Recent concern over the relative health of the Chinese and
European economies has raised concern over weakening global
demand. Both the U.S. Energy Administration and the
Organization of Petroleum Exporting Countries have lowered
their expectations for 2015 global demand in forecasts
released just this past week.
Against the backdrop of a weakened global demand, the global
oil market appears to be well-supplied, with U.S. production
hitting a 28 year high and Libyan output now up to 800,000
barrels per day from 200,000 only months ago.
forward, geopolitical tensions in the Ukraine and the Middle
East may once again exert an upward pressure on the market
but at this point, barring an unexpected weather related
supply interruption, depressed crude pricing appears to be
the market characteristic for the near future.