After a smooth ride in the early phase of the year, oil prices have persistently declined over the past one month. The slide has been so acute that oil prices touched the lowest level in 27 months on October 7. Global slowdown mainly in Europe and China that crippled manufacturing activities, a surge in oil output and a spike in the greenback thanks to the wrap-up of QE policy in the U.S. punished oil prices.
The value of the U.S. dollar peaked to the four-year high with respect to a basket of currencies as investors wagered on the speeding domestic growth. As we know oil price shares an inverse relationship with the greenback, the recent slide is self explanatory. Also, easing geopolitical tensions in oil rich nations like Russia repressed oil supply worries, reinforcing the plunge (read: High Output and Weak Demand Hitting Oil ETFs).
Oil inventory remains in a good shape in the U.S. Per Bank of America, the U.S. will likely be the world's prime oil extractor in 2014 leaving Saudi Arabia and Russia behind courtesy of its shale-oil boom. In fact, the U.S. has produced the most oil in 28 years this year whereas the Organization of the Petroleum Exporting Countries (OPEC ) delivered the highest yearly production growth. Per the Energy Information Administration (AMEX:EIA), oil production in the U.S. will peak to the highest point in 45 years next year.
Per Bloomberg, the International Energy Agency (IEA) trimmed its forecast for oil demand this year ...
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