Oil is having a rough time in the market today after the United States Energy Information Administration revised its expectations with regard to the average oil price for the year. Today, we'll talk about the EIA's new estimates, how the oil market reacted, and what we can expect to see from the price of oil moving forward. So, let's get right to it…
EIA Estimates Have Been Revised
Earlier today, the United States Energy Administration made a major revision to its forecast with regard to the average price of WTI crude oil throughout the course of the year f2015. Before today's report, the agency was expecting that WTI crude oil would average around $49.62 per barrel throughout the year. However, today's report shows revised expectations coming in at $49.23 as the average price throughout the course of 2015. The revised expectations insinuate a further downside potential for the price of oil moving forward throughout the rest of the year. The agency also revised its expectations with regard to crude oil output. In the report, the EIA estimated an output of 9.22 million barrels per day; down from last month's estimate of 9.36 million barrels per day.
How The Market Reacted
As we've come to learn, the news tends to move the market. This goes for stocks, commodities, and even currencies. When there's bad news to be had, we generally see declines; and that's exactly what we saw today. According to NASDAQ, crude oil closed the day off at $44.11 per barrel after falling sharply throughout the entire trading session. Today's declines cap off a 7 day slide that we've seen in the value of the commodity since its most recent rally.
What We Can Expect To See Moving Forward
In my opinion, the EIA was correct in revising its price expectations with regard to crude oil. In my opinion, the value of oil is going to continue on a downward trend and may even reach values below $40 per barrel by the end of the month. Here's why…
Supply Glut Remains – First and foremost, the reason that oil started declining back in 2014 was a supply glut. The simple fact is that the world was producing far more oil than it used. As a result, the law of supply and demand forced the value of the commodity down. Unfortunately, there still has not been a solution to this problem. The supply glut around the world is persistent and will likely continue. Therefore, while we may see slight increases in the value of oil here and there, I'm expecting to see downtrends overall.
Economic Conditions Signal Slowing Demand – As mentioned above, supply and demand plays a key role in the value of oil. Therefore, in order for the price of the commodity to increase, demand will have to increase. However, I don't think that's going to happen any time soon. The reality is that economic conditions around the world are still relatively poor; and during times of unstable economic conditions, consumers do what they can to spend less. This means less driving and less energy usage; ultimately causing declines in demand for oil.
All in all, it seems like low oil prices are here to stay; at least for the foreseeable future.
How Binary Options Traders Can Take Advantage Of The Trends
Simply put… purchase puts. The reality is that the likelihood of oil seeing any momentous gains is very slim. Adversely, declines are incredibly likely. So, look for high points in the value of the commodity; and at these points, purchase puts to ride the resulting downtrend to profit! Read more financial news by TheBinaryAdvisor.
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