2019-11-13 05:58:071970-01-01 00:00:00

Oil Prices Weaken

Historically, the oil market has been characterised by that of a bullish trend, however, in more recent times, oil has adhered to that of a bearish trend. With the price of oil falling more than 20 percent on Wednesday, crude oil futures in the United States closed at $51.68 a barrel, down 3.4 percent for the day, despite markets performing reasonably well on the day.

The decline in prices suggest that the demand for oil is weaker than expected as the global economy slows, with investors showing concerns that the price will go down further. Investors are also concerned that President Trump’s tendency to impose tariffs on imports from Mexico and the levy trade wars will hinder the growth of the economy and oil prices will facilitate the aforementioned bearish trend.

Suffice to note that the outlook for oil prices have been heavily revised. Analysts have held a more positive sentiment on the market and predicted that the oil price will jump to $90 a barrel and potentially higher due to Trump’s tightening of sanctions on two leading producers, Iran and Venezuela. Intuitively, the source of will become scarce and ultimately push the oil price.

The decline in crude oil prices is a telling indicator that growth in the global economy is slowing down. Given that oil prices have further implications on the economy such as its effect on other commodities such as copper, nickel and steel have also felt the impact of the decline. Neil Bradley, Chief Policy Officer for the U.S. Chamber of Commerce claimed that “as we assess the economy’s vulnerabilities, a fall in oil price is one of the things we’re looking at.”

While adhering to recent government reports, fuel inventories in the US are on the up, which indicates that the demand is weaker than expected. Cyclically, the supply of oil is often tight in the month of June and the price is high due to the seasonal demand. The supply of crude oil increased by nearly seven million barrels for the week, the highest level in two years.

The benchmark of oil fluctuated in the past year. The recent market condition is similar to that of 2014 and 2015, as the prices declined to $30 a barrel. Some analysts predict that the price of oil will respond in a similar fashion to last year after the Trump administration made it far more accessible for countries such as Japan and India to continue buying oil from Iran without running afoul of American sanctions. The Trump administration has since expressed that the sanctions against Iran will become stricter and do more to curb Venezuelan oil exports.

The tumbled prices has raised concerns about the domestic growth in the US and its rippling effect on the global economy. The softening global economy coupled with a strong U.S. dollar – which makes oil more expensive for other countries – could have further implications on the demand of oil. Additionally, with trade tensions escalating between the two major economies, it is highly likely that the aforementioned ripple effect will take its toll on highly dependable countries and commodities alike.  

David Malpass, World Bank Group President, noted that the “Current economic momentum remains weak, while heightened debt levels and subdued investment growth in developing economies are holding countries back from achieving their potential. It is urgent that countries make significant structural reforms that improve the business climate and attract investment. They also need to make debt management and transparency a high priority so that new debt adds to growth and investment.”

The drop of oil and gas prices will aid consumers, particularly those of lower-income households. Although most oil companies can still earn money at the current price level, in terms of looking forward, the nature of lowered oil prices is not sustainable, as the drop in prices will ultimately facilitate loss.

In essence, with trade tensions mounting and oil prices falling, the economy currently is in a predicament wherein short-term benefits seem far more attractive than long-term goals. Suffice to note that commodities and industries have sustained losses due to the volatility in prices. Given that the nature of economic has historically led recession in business, companies sales revenue will decline, unemployment rate increase, it’ll be interesting to see how the economy reacts to the fall in price.

By Chang Liu

Click here for a 7 days access to our Lotus Blue Portal.

KOSEC does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information provided. KOSEC is intended to provide general information only. Please be aware that investing involves the risk of capital loss. This message is confidential and may be privileged. It is intended only for the use of the addressee named above. If you are not the intended recipient, any unauthorised dissemination, distribution or copying is illegal. We do not guarantee the security or completeness of information hereby transmitted and are not liable in either respect or in respect of any delay. Nothing in this message is intended as an offer or solicitation for the purchase or sale of any financial instrument. Any market prices or data, unless specifically verified and identified as such, are not warranted as to completeness or accuracy. Kodari Securities Pty Ltd (KOSEC) is a Corporate Authorised Representative (No. 399 556) of Longhou Capital Markets (AFSL No. 292464) which is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC wishes to disclose that KOSEC and its staff may hold stock they recommend in their own portfolios and that any decision to purchase recommended stock should be done so after the purchaser has made their own inquires as to the suitability to their own requirements. Click here to view our FSG.

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.



KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.


Latest TV Commercial