U.S. Oil Prices Decline as Fed Exuberance Wanes


Summary and analysis-

The article titled as, “U.S. Oil Prices Decline as Fed Exuberance Wanes” appeared in Wall Street Journal on 10/8/13 12:24 AM, later on updated on September 20, 2013, 2:41 p.m. ET. The article was written by BRETT PHILBIN focusing on the issue of declining of oil prices in open market due to current fluctuations in the production and other political pressure. In the US Federal Reserve’s is still easing the monetary policy despite of current disturbances in Middle East.
The effect of the change of the political situation is different in Europe and USA, the prices of oil goes down mainly due to overdone production resumption of Libyan oil. The assumption acts as future market and contract goes in different mood in Europe and USA. The tension of Syria and US over the issue of chemical warfare also added the sensitivity to issue of oil prices. At the end of trading session, the prices fell 65 cents or 0.6% to $105.74 a barrel on the New York Mercantile Exchange. Even the price of heavily traded November contract declined to 38 cents or 0.4% to $ 105.48 a barrel. Fed $85 billion-a-month bond buying program decreases the power of Dollar thus making the buying of oil cheaper in terms of other currencies. The price of the oil in world market is related to many factors, the obvious factors are production level, cartel formation and international rules and regulations. The other factor, which also plays an important role in the price of the oil in world market, is the stage of dollar and its relation with USA. The prices of oil in recent period has registered decline despite of such political tension because of one reason only that there is enough production of oil and Federal reserve policy of US to going for reforms which weakens the position of Dollar. If we consider Brent crude for November delivery on ICE Futures Europe rose 40 cents, or 0.4%, to $109.16 a barrel. There was fear in the market that US might attack Syria over the chemical warfare issues but in recent development, the Syria was ready to comply with international authorities. Despite of such pressure Libya production of oil is increasing or we can say improving per day and recently it is 800,000 barrels a day which is quite improvement in comparison to earlier 150, 000 barrel a day. The market expert analysis shows that future prices of oil are going to decreases as market is getting good recovery.

Some countries also do future and forwards contract in the oil as method of investment and to earn higher return on their investment when the prices of the oil rises to certain level. The oil resources are rare and their demand exists in every economy so the prices of oil have become an important issue and it is now guiding much international partnership in the world politics. The USA is choosing the ally very carefully that they can increase their power in international arena.

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