THE REASON OF FALLING TREND IN OIL PRICES

In the last quarter of 2011 oil prices continuously rises and this trend continues for further first quarter of 2012. However, in April oil prices start taking u-tern and the price of oil start falling. This trend is continuous till the second week of June. Till second week of June oil already has lost its price up to 20 percent. This is a big downfall of the oil prices. Many analysts try to explain the real reasons of falling prices of oil. But most of the analysts could not present the solid reason for the price fall. In this article I want to present my opinions about the present fall in prices of crude oil and its affiliated products like gasoline, diesel etc. 



It is the basic rule of economics that prices will fall down if the supply of commodity in the market becomes larger than the demand. This law could be seen applicable in the market in different shapes. Under the present conditions this law also holds on the demand and supply of fuel oil. In the first appearance this reason does not have weight but if you go in details everything will be clear and you will find the actual reason is the difference in demand and supply of the oil in the market. Here are the details:

Due to the continuous economic recession during last few months the economies of most of the countries are struggling. Every country is trying its best to meet the challenges offer by this economic slump. Due to economic crisis purchasing power of the majority of the customers fall down and the people start thinking about their spending. This thinking creates the situation called pullover of customers in the market. When this happened it shed adverse effect on the sales of almost all the products in the market. Some products got big effect while other feels low pressure. The ultimate influence of this trend converges on the fuel demand because fuel is the essential thing in manufacturing of the products. When the customers do not go to the market the sale of commodities fall down which also affects the production processand when production falls the demand of fuel also fall down which ultimately affects the prices of fuel.

Same is the case with the oil prices in the present year. Everyone is thinking to cut their spending to meet the expenses from their limited means of income. This trend affects the sale in the market and the manufacturer become more vigilant about the extra production and ultimately the prices of fuel oil dropped gradually up to the level of 20 percent. In other words economic crisis is indirectly affecting the prices of crude oil and its related products. Taking in view the above discussion it is clear that prices of oil will continue to fall till it reaches the certain level and after that it will start rising due to the limited supply of the oil by the oil producer countries. It is the natural process that manufacturer only operates on the certain level of prices and after that level the manufacturer do not want to produce the commodity because after that level it become unviable for him to continue the manufacturing process. Same will be the case with the oil producer countries and they will slow down the production of the oil and in the result once again oil start raising its prices.



However it depends on that certain level that how rapid that level of prices reaches. If it reaches in few weeks that you will see the rising prices of oil in the next month and if it takes some time than you can enjoy the low prices of oil in the international market.

Taking in view the situation experts are advising the investors to invest in the commodities rather than in oil or currencies. For this purpose there are some good commodities trading companies which offer their services to the investors to trade in commodities and save their time and money. One such company is traderush. This company is working with the motto “Trade with [traderush] for quick and rapid profits, easy withdrawals.No payment, no spreads or hidden fees”. One can avail the help of these companies for making money in the trade of commodities market.


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