Siavash Yafteh, analyst contest
What moves the price of oil? How do you decide when oil gets too expensive to buy or too cheap too sell? $10, $30, $100? In order to answer these questions we need to determine the true value of oil. Before getting to that, you probably know that these days we are in an over supplied market and now that the Iran’s sanctions are lifted yet another supplier would be coming back to the market. Iran would be trying to get back what its lost shares in oil market. That would add the pressure even more.
Now if we want to determine the oil value, we must compare it to Real Money. In the Following chart you can see how many Barrels of oil you can get with one ounce of Gold. As you see one the chart, when oil gets too expensive meaning with one ounce of gold you can buy less barrels of oil, price moved down. We saw that in Aug 2005 and Jul 2008. According to the data in Jan 2016 you can buy 34.61 barrels of oil with one ounce of gold, which is the highest pick of all times, suggesting that price will rise in the following months.
I think now we can answer these questions.