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Three reasons behind the slide in the oil price

by , 26 September 2014

Over the last few months, the price of crude oil has continued to ebb. It's now just sitting at over $97 a barrel.

But is the price of oil expected to fall further? And what is leading to this fall in the crude oil price?

Let's take a closer look…

Is the price of crude oil going to continue to fall?

The price of crude oil has been trending lower since mid-June. Have a look at the chart below of the oil price over the past year…

Chart of the oil price over past year

You can see the steep decline over the past few months of the oil price. Brent crude oil is down nearly 16% from 19 June.

But the crude oil markets are oversold. Over the near term, the prices should recover slightly as markets rebalance.

Three reasons why the oil price is falling

Reason #1:
The crude supply in the US and other extraction has changed the supply side dynamic. The availability of shale oil is putting a lot of downward pressure on the oil price.

Reason #2:
The time of year is also having a bearing, Dr Kent Moors in Money Morning US explains. As the western world is just coming to the end of the summer season, demand is less.

Once it enters winter, demand should notch up.

Reason #3:
Traders are simply discounting geopolitical events in significant oil producing areas. In times gone by, events like this would have sent the oil price spiking higher. But not now.

Looking at the futures prices some time into the future, there does seem to be an anticipation by traders that prices will rise. But not yet.

So there you have it, three reasons behind the slide in the oil price.

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Three reasons behind the slide in the oil price
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