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Crude Oil Triggers Profit Booking

Dec 09,2014  Market News  Comment: 0

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Santa Barbara, CA – (StockNewsDesk) – 12/09/2014 — International markets saw some profit booking, yet again, falling prey to declination of crude oil prices. Crude oil prices have fallen as much as 5% in a matter of two days from $67 a barrel to $62 a barrel. Developed economies see this as a huge concern, especially after the fact that middle-east oil-producing countries denied reducing the supply of crude oil production to the world. Saudi Arabia is the largest producer of crude oil with a market share of 40%. So it is quite natural for other oil producing countries to follow the country. As a matter of fact, the crude oil producing countries beat the target of producing oil. The countries collectively produced 30.56 million barrels, compared to expectations of 30 million barrels, for the sixth consecutive month.

The oil producing countries collectively decided to offer crude oil to Asian countries at a steep discount. This move is being taken to defend its market share from the booming shale business. Offering steep discounts triggered the fall in crude oil prices, making investors sceptical over global growth prospects. The fall in crude oil prices affirmed that oil prices have no chance of increasing, at least for the next six months. Experts believe the crude oil prices will be staying around $65 a barrel for the following half a year.

Crude oil prices gained volatility after Saudi Arabia took the competition from the U.S. shale business to the home ground by offering steep discounts. These measures were taken in order to retain its market dominance and compete with the U.S. shale business. Saudi Arabia offered decade-low oil prices to counter competition from U.S. shale business. The shale business has taken root on the back of horizontal drilling and hydraulic fracturing.

Crude Oil Triggers Profit Booking

Falling crude oil prices remains a threat to the developed economies from the perspective that there is a direct correlation between falling crude-oil prices and economic growth.  A lower consumption of crude oil points toward a slow economy. Falling crude oil prices, coupled with the slowdown in Chinese economy and recession in Japan, might hurt the developed economies. Japanese lawmakers confirmed that the economy may be heading for a deeper than expected contraction. Gross Domestic Product (GDP) growth in Japan for the fourth quarter may be lower than the Government estimates.

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