One of the most talked-about asset crises in the recent past has been the oil crash. Sluggish demand thanks to a soft macroeconomic backdrop in some developed regions including the Euro zone and China, booming oil production resulting in abundant supply and a strengthening dollar played foul.
Oil prices continued their ascent in the first half of the year courtesy of a prolonged and severe winter in the Northern Hemisphere, and geopolitical tensions from Russia to Iraq that disturbed supplies. As a result, the commodity touched the triple-digit mark then. However, this was a short-term respite.
As soon as the harsh winter passed, the geo-political crisis took a backseat and the U.S. economy started delivering stellar economic numbers, oil bucked its trend. Solid U.S. economic growth for the last two quarters (Q2 and Q3) took the greenback to multi-year highs against a basket of currencies. This in turn weighed on commodity investing (read: Play an Oil Price Drop with These Inverse ETFs).
On the other hand, OPEC slashed the demand outlook for oil by reducing its estimates through 2035 barring 2015. The group indicated that the demand could be as poor as the 14-year low in 2017. Deflationary worries in the Euro zone and the still sluggish China and Japan seem to be the main culprits.
This scenario spurred oil-rich nations like Saudi Arabia and Iraq to involve themselves in a ‘price war'. Just what Saudi Arabia – the top oil exporter in the world – did few days ago, Iraq did on November 10 by offering oil to the U.S. at discounted prices. Notably, the U.S. itself boasts a huge oil surplus thanks to the shale-oil boom.
The WTI crude traded below $80 per barrel – a ...
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