09 December 2015
Have you noticed that the market either shaking or freezing? In fact, for sure, there can be many reasons for this. Alexander Goryachev, a leading FreshForex analyst offers to look at one of them — oil.
If you look at the dynamics of oil prices over the past fifty years, we can see a pattern. Quotes are moving in the long nine-year cycle: a nine-year fall period, replaces nine years of price growth. In periods of nine-year fall in the value of hydrocarbons falls below the prime cost, then after a while a nine-year cycle of growth begins. This year, the companies, which produce shale oil in the United States, have the highest level of the prime cost. This level is $32 /barrel for the WTI. The summer of 2008 was began with the current long-term cycle of decline in oil prices, which could be completed in the summer of 2017.
What is now?
The IEA has reported the record growth of world reserves of crude oil to the level of 3 billion barrels against the background of production increasing by Saudi Arabia and Russia — the high growth of stocks always causes a drop in oil prices. In the middle of December, there will be a meeting of the FOMC, where the monetary regulator may raise interest rates and this will support the demand for the dollar and have a negative impact on the quotes of the "black gold" because the price of oil is denominated in the US currency. We can expect for the decline to a strong support level 39.50$/barrel. The correction to the level 50$/barrel can happen in the end of December as well.
What will happen?
By 2020, we can see a growth of oil prices to $80. Firstly, the current low prices of the "black gold" will help investment reduce by the oil and gas companies aimed to increase the capacity production. In this regard, the highest offer on the world market will not be maintained in the long term, which is a positive factor for the quotes. Secondly, the United States can go for a smooth devaluation of the currency after the presidential elections in the end of 2016, at the background of rising deficits of federal budget and payment balance, which also have a positive impact on the quotes of oil, because the cost of raw materials is denominated in the US dollars.
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