United States Oil (USO) tumbled down again in the past few months and reached its lowest level this year. Also, the price of WTI oil plunged by over 10% this month (up to date) to $82. Will prices keep coming down? What has brought down oil to its lowest level in recent years?
As you can see from the chart above, the prices of USO and WTI oil (presented in normalized prices to the end of August) took a nose dive in recent weeks. Nonetheless, the current Backwardation in the oil future markets is keeping USO slightly above oil prices. So what happened in the oil market to result in such a shift in oil prices? Let’s start with the latest news related to the demand for oil.
Lower projected demand for oil
It is not surprise that after the IMF reduced its global economic outlook for 2014 and 2015 mainly due to slower growth in China, Brazil, Russia and EU, the International Energy Agency also cut down its outlook on the global demand for oil: the IEA revised down the 2014 global demand by 0.2 million bbl per day to 92.4 million bbl/day.
The rest of this analysis is at Seeking Alpha
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