The gradual decline that was witnessed earlier this year with regards global oil prices has started to fade out. An economic term would be that the price has bottomed out and is now set for a rise. Over a month ago the price of the global oil benchmark, Brent, was as low as $28 to a barrel.
Today the price is in the $39 region. Last week crude rallied by 7.2% and went a long way in helping the global markets including the S&P 500, to be pushed up by 1.1%. What has contributed to this recovery?
So far there has been a lot of market speculation regarding an improved or stronger demand for the commodity and some decline in production. Helping the overall glut which was previously being experienced. Supplies coming out of OPEC have reduced and the active oil rig counts in the United States have dropped by 6, according to data from Baker Hughes. This reduction in supply has helped to counter Iran’s plans of boosting oil production to about 4 billion barrels a day.
On the demand side, India is stepping up as a world center. Replacing China (whose demand has slowed due to Government moving its economy away from heavy industry). In the last financial year India’s diesel consumption has risen by 6.4% and gasoline by circa 14% according to data from India’s oil ministry. This has been attributed to a growing middle class with more money backed by structural and policy changes made by the Government.
The current outlook on oil has hence gone from negative to
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