Judging by today’s situation, many experts do not doubt that crude oil may well stay below $100/b forever. At the same time, more experienced analysts are not in a hurry to make such brave predictions. Still, they agree with them to the extent that oil prices are probably going to stay low for quite a long period of time. In particular, they name serious levels below $50/b.
Yet, these are not some assumptions made out of thin air. The experts back their suppositions with several factors. In particular, crude oil has been a weapon of manipulating the political, economic and financial situation around the globe since oil is considered to be the «blood» of contemporary economy. History shows that since the1970s, a major recession broke out almost instantly each time after the price of crude oil doubled. More often than not, the price collapsed to the critical point and stayed there for at least 6 months, thereby exerting severe pressure on many economies around the globe.
With that said, most analysts assume that $50/b is the very critical point this time. While, some optimist assume that the price may well recover up to $70-80/b in the near future, history shows that $50/b is not the bottom. If the worst-case scenario manifests itself, the price is probably going to collapse further down to $20/b, especially if the OPEC stubbornly abstains from cutting down on its oil production amid declining global demand, thereby widening the oversupply.
For the sake of information, over the course of the time period between 1974 and 1985 oil prices fluctuated within the scope of $50-$120. From 1986 through 2004, the range of price deviation narrowed down to $20-$50. If to ignore some isolated price moves, the price of crude oil is deviating within the limits of $50-$120 again.
Based on the mentioned example, we can conclude that today’s oil prices behave the way they did when the OPEC was strong and influential. During the period of 1986 through 2004, the OPEC lost most f its influence and power. This is what stimulated new oil market players to develop their oil fields and take their share of the market. Gradually, the competitive pricing model ousted the pricing monopoly. In 2005, China started boosting its oil reserves, which gradually resulted in insufficient supply to cover the growing demand. This is the time, when the OPEC started resurrecting and regaining its power and influence and establishing a new world order. Historically, the mentioned level of $50/b seems to be something like a border between monopoly and free market pricing, Masterforex-V Academy assumes.
According to the experts, there is a certain OPEc collusion going on there. The exporters are determined to drop the prices to the limits and make other market players like the USA, Russia, Iran and others to cut on on their oil production, thereby yielding their market share back to the OPEC.
Masterforex-V Academy experts assume that only after such production cuts, we will finally be able to the balance to restore. Saudi Arabia and other OPEC nations are not determined to put up with the role of compensatory / secondary oil-exhorting nations. They are determined to make those U.S. shale oil magnates the very secondary players in the global market of crude oil.
