There are 101 reasons why oil has fallen as hard as it has, hitting a two-year low. The main reason in the back of it all is U.S. oil production. Yet after a substantial drop out of the normal expected daily trading range my phone rang off the hook with calls from people wondering why oil has fallen so far. Well, there are short- and long-term reasons (in no particular order) and we will try to cover some of them.
1. Rising U.S. crude oil production.
2. Rising production in OPEC.
While OPEC
raised production in response to potential loss of Iraqi and Libyan oil
production it seems that they over produced for a supply loss that in
the case of Iraq never happened and in Libya was rather sort lived.
3. The rising dollar.
With the U.S. talking about raising interest rates and the rest of the
world needing to lower rates, this divergence is creating even more
downside pressure for oil.
4. Geopolitical events weighing on demand.
The First case of Ebola in the U.S. may get people to restrict travel.
5. Protests in Hong Kong are also a negative.
With the big Chinese National holiday happening this can't be a positive for China's economy.
6. Energy mix.
The energy mix is changing. With the emergence of huge new supplies of natural gas and its growig uses, even electric cars, the previous projections of explosive oil demand growth have to be tempered.
7. Questionable U.S. demand.
The market has been counting on the fact that an improving U.S. economy will increase demand.
8. Increased U.S. product output.
The reason why U.S. liquid output is so high is the quality of U.S. shale oil.
