IPC - Market Commentary - The Decline in Oil Prices
There has been a lot of discussion around the sharp decline in oil prices recently; we just wanted to take this opportunity to highlight some of the key issues and the potential impact of this trend.
There has been negative momentum in the price of oil for the last several months, but what is surprising is the speed of the recent drop – over the last six months the price of oil has dropped by almost 40 %, from a high of $107 in June to just over $62 in December, a new low for this year. It should be noted that although this is a significant market event, it is not anything we haven’t seen before, and certainly does not compare to the magnitude of the decrease in 2008 – at that time we saw the price of oil drop 78% from $145 per barrel down to $31 in a few short months. So what is to blame this time? Several key factors are at play here, including to a large extent, geopolitical issues. But what this ultimately boils down to is economics 101: supply and demand. ...Click here for full article!