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Friday, February 19, 2016

Oil madness



The oil madness is causing haywire in the market. Just look at the headlines of the financial news, journals, blogs, or research reports and you'll see how volatile the market is because of the oil price.



Here's a recap of some of the causes of the oil movement recently...

1) Oil price gain as news on Russia-Saudi meeting to discuss on oil production were released. The subsequent decision to lead a freeze production encouraged the oil rally.

2) Oil price dropped as concern over the participation of Iran. If Iran chose not to join in the production freeze, it'll not be sufficient to control the overwhelming supply of oil and thus the oil price's drop might continue.

3) Oil rally again once Iran made a remark on "supporting" the Russia-Saudi led production freeze even though the market was not sure the "support" equivalent to "action".

4) Oil eases again now that a U.S. government report showing a rise in crude stocks underlined the supply glut, countering optimism over this week's deal by oil producers to freeze output.

If you noticed, the oil price has never been so uncertain before but with the slowing global economy, it's easy to understand why. 

Oil fell towards $34 a barrel on Thursday, giving up an earlier gain. 

The U.S. Energy Information Administration said crude inventories rose by 2.1 million barrels last week, less than analysts expected.

But Wednesday's report from industry group the American Petroleum Institute said they unexpectedly fell.

Iranian Oil Minister Bijan Zanganeh met counterparts from Venezuela, Iraq and Qatar on Wednesday but did not say whether Iran would cap its output in keeping with the move by Russia and Saudi Arabia.

On Thursday, Iraq's oil minister said talks would continue between OPEC and non-OPEC countries to prop up prices.

Oil has collapsed from levels above $100 a barrel in mid-2014 due to excess supply, in a slide that deepened after the Organization of the Petroleum Exporting Countries later that year dropped its policy of cutting supply to boost prices.


So, where is oil heading next? What are the catalysts? Analysts are in for a ride here...it's a question of going up or down.

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