Tuesday, September 11, 2012

>Why is the oil price not falling?

The current and expected slowdown in global growth has led to a decline in prices of cyclical commodities (metals), but not in the oil price, which has held up despite the slowdown in global demand for oil. Why is the oil price insensitive to the current global economic cycle? Probably because:

1- A shortage of oil remains the outlook for the medium term, even though it has been deferred;

2- The producer countries (mainly Saudi Arabia) adjust their production according to demand;

3- Geopolitical risks have led to substantial precautionary stock-building.
The fact that the oil price remains very high while growth is weak is obviously pro-cyclical.

To read report in detail: OIL PRICES