What is Driving the Oil Price Down?

What is Driving the Oil Price Down?
What is really driving the price movement?

What is driving the oil price down is the fact that the market believes the market is oversupplied.

That’s what Will Rhind, founder and CEO of GraniteShares, outlined in a video interview with CNBC on Friday.

“What is really driving this price movement down is the fact that the market believes that the market’s oversupplied and this is really the main factor coming into the end of the year when global markets are down and everybody’s feeling a bit bearish about growth more broadly and that’s affecting the price,” Rhind said in the interview.

“There are a lot of people very bearish about global growth for next year and in terms of the fund manager positioning in the oil market we’ve seen that positioning come off towards the end of the year … I think that could be just a function of people looking to close up books and investment mandates for the end of the year,” he added.

Rhind told CNBC that he thinks there is more risk skewed to the upside in terms of oil in 2019.

“I think that OPEC will act and will look to take production off the market and that has historically helped the price of oil,” Rhind said in the video interview.

“I think also China will be a big factor next year. I think China will look to go in the opposite direction of the G7 countries and look to ease and put more liquidity into the market next year and that should support oil and other commodities,” he added.

Earlier this week, Wood Mackenzie’s Chairman and Chief Analyst Simon Flowers stated in his latest The Edge column that “the sharp retreat in price may turn out to be a good thing, injecting a healthy dose of reality to the industry at just the right time”.

In the column, Flowers said Brent over $80 per barrel “always seemed too good to last, defying the fundamentals”. The WoodMac analyst also confirmed in the column that WoodMac expects Brent to average $66 per barrel in 2019.

“That’s a tad down on 2018 though still a price that allows companies to generate free cash flow and continue to strengthen finances,” Flowers stated in The Edge.

GraniteShares, which his headquartered in New York, describes itself as an independent, fully funded ETF company. Rhind is a 16 year veteran of the ETF industry, the company’s website highlights.


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rabih  |  December 25, 2018
i think shale companies act irrationally and end up hurting everybody including themselves. they have done it in 2012-2014 and they have done it again. Never really generated free cash flows. and never learnt the lesson
Demir Karsan  |  December 24, 2018
There is no need to write lengthy essays abot what is driving the price of oil down: The recent 3-4 million shale production from USA The inability the world demand in recession not able to absorb the increased USA production. The good news is this is making expensive energy deals such as solar and wind economically unfeasible. When the USA production flattens up and the worl economies recover, oil will com back with a vengeance. This is a good time to invest in O&G stocks.
John David LaRue  |  December 22, 2018
"the market believes the market is oversupplied" is a little bit simplistic. The real cause is too much US production increase. The industry used to be regulated by allowables (in my lifetime). The regulatory agencies abandoned them in the oil shortages of the 70's when were were producing flat out. Now the regulatory agencies refuse to pit allowables back in place because they are consumer driven and want cheap gasoline. The industry refuses to regulate itself out of both greed and fear of charges of collusion.
Neil Gipson  |  December 21, 2018
Socialist control of natural resources and wealth!