Not so long ago the G20 gathered to hold another summit. One of the key issues on the agenda was the international support of the so-called “green” technologies.
During the summit, Barack Obama said that any country should give priority to the green sector when implementing the strategy of energy security.
In order to find out the current state of affairs in the global market of crude oil experts conducted a comprehensive analysis of the market.
Tips for Investors: Oil Market Sees Downtrend. Ecologists Show Concerns.
Early May brought an unpleasant surprise to oil investors, thus initiating a downtrend in the market of oil futures. In 3 trading days, crude oil lost 8.5% of its value – the price dropped from $104,91-106,24/b down to $97,31-98,06/b. Since then the bears have been dominating the market.
Cheaper US Dollar. Over the first two weeks of May, the US dollar depreciated by 0.2%. As a result, investors started reorienting towards commodity markets. The US Dollar has recovered. But it is too late.
Higher crude oil reserves. As of today, the US crude oil reserves are estimated at 1.5 billion barrels.
Eurozone problems. The manufacturing production is declining while the debt crisis keeps escalating. Now it is Spain ’s turn to ask for external financial support.
President Obama promised to support the “green” energy. However, according to Obama’s administration, a gallon of crude oil should cost at least $75 for the alternative energy to be economically rational. Therefore, today’s weakness of the crude oil market is a major concern in this aspect.
As of June 9th, crude oil prices were rallying for 3 days in a row on speculations connected with QE3. However, the rally was temporary (The bears are still dominating the market).
According to , at the end of the US trading session (June 9th), July’s WTI futures appreciated by $0.73 or 0.9% up to $85.02/b.
In London, July’s Brent futures appreciated by $1.89 or 1.9% up to $100.73/b.
If to consider Obama’s promises, the US government is going to invest $500 billion in the creation of the “green energy” industry. Some real steps have already been taken:
· The agreements with Solarworld on the solar energy development.
· The statements made during the G8 summit.
· The local support for the introduction of green technologies.
However, there is a major problem: the cost of the “green” energy: $75 a gallon is hardly probable in the current conditions. The global market of crude oil is showing weakness. However, after the period of destabilization is over, oil prices may well hit $80-90 per gallon.
As for the pricing, this aspect is unreachable for such innovations. Firstly, at this point, no “green” energy source can provide enough energy to supply all the energy needs.
Therefore, the “green” energy cannot become the basis of economic prosperity.
According to the Commodity Trading Department of , there are 2 factors preventing oil prices from collapsing:
1. Higher consumption of energy around the globe (mainly at the expense of China and India).
2. Speculation (from individual traders to oil giants such as Exxon Mobile etc.)
This means the oil giants just won’t let oil prices decline below a certain level.
Crude oil and stocks show positive correlation most of the time. The intraday trading volume in the market of crude oil has increased considerably:
Market Leader and would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
In your opinion, what are the reasons for the recent oil price decline?
