Oil prices have been drifting lower recently. Since February this year, crude oil prices have slipped by 11 to 12 percent. Unlike early 2012 when geopolitics dictated major fluctuations in price movement, crude oil prices now are largely being governed by the market forces.
Its a little wonder why prices have continued to recede when nothing has been suppler than the supply itself. The phenomenal supply shock in the United States brought by the fracking of shale oil and gas has sent ripples across the global crude oil market. Add to it the steady yet gradual recovery of the Iraqi oil, increasingly spare capacity of the OPEC and prospects of shale revolution outside US borders.
While the global output has played its role in keeping a lid on the crude oil prices, the affects of slower-than-expected growth in key oil consuming countries like China, Europe and US cannot be overlooked as well.
So which way from here? From how the market forces have been directing price movements, and from what the renowned research houses across the globe put forth, the global oil market might just continue its gradual pace with weakening crude oil prices in the long-term.
Goldman Sachs sees near-term headwinds to real growth improvement and the rise in unconventional supply in US and suburbs to rein its prices. Similarly US Energy Information Administration (EIA) and Barclays has cut oil price forecast based on sluggish global demand and rising US output.
It would be logical to say that the overall sentiments are not bullish at all, especially with excessive supply cushion and no significant improvement of growth in the global trio - China, US and Euro zone. At the same time, no major price slippages are expected in the coming six months to one year, at least in the demand/supply realm. And any spike or fall likely will be temporary and geopolitical.
What can spice up the crude oil prices is increase in consumption with simultaneous decline in output, or major production cuts amidst the shrinking demand, none of which is likely any time soon.
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