Who is pushing up crude oil prices? These days probably everyone knows the right answer: It is speculators. However, everything is not that simple. There is another market driver - the US Federal Reserve.
The overcrowded American highways look fairly strange against the background of the gasoline crisis, which is so popular with the media. American car owners don’t seem to be concerned about the situation. They don’t even seem to try to consume less fuel. Probably any US citizen knows the reasons why the fuel keeps growing in price: imperfect engines, the OPEC, the amount of cars… or even China. Obviously most of these factors do affect the prices but it is ridiculous to consider them as the reasons for the fuel crisis.
So, who does really manipulate the prices on crude oil and oil products? As we have just said, these are speculators and the US Fed Reserve.
Let’s consider the latest events. Until recently nobody could confirm that the increased global demand for crude oil made the prices grow by $1 per gallon on average as compared to the previous year.
In reality, the railway traffic started increasing as the US economy began to recover. The traffic around the world has just reached the pre-crisis levels. Nevertheless, the American oil experts say that the domestic consumption of gasoline has declined by 3.5% over the last month. The American car owners consume about 400M gallons of gasoline a day, which makes it possible to determine that this is a significant consumption decline. However, the paradox is that the decline didn’t seem to make the crude oil futures lose in value, which should have happened according to the market laws.
In the meantime the media keep convincing the audience that gasoline prices are conditioned by crude oil prices. However they conceal that oil and gasoline are intended for different types of consumers. Crude oil is bought to be refined while gasoline is bought to resell it at retail prices. Yet there are speculators who earn on price fluctuations.
Investors keep being misled by confusing data and interpretations. In early April Goldman Sachs published a review recommending its clients to get rid of commodity trades, including crude oil. The piece of advice was interpreted as a warning. As a result, there emerged numerous articles saying that the record-high price levels in the market of crude oil had caused a significant increase in the price… It sounds interesting: the levels of speculative trading caused a price increase. They used to say that the price of crude oil is determined by the growing demand for oil against the background of economic recovery. Then follows a range of “useful” recommendations: some analysts recommend losing all the trades because the price bubble is too big, the rest urge to enter the market because crude oil prices will keep growing further.
Do banks and investment companies really want to profit at the expense of destroying the weakened economy?
Brent oil. Daily chart. There is consolidation around 124.5. The closest support is around 119.5.
The Department of Market Volume Analysis,
