Crude Oil has started to fall again and is anticipated to fall well. The main reasons for the fall are Middle East tension which is almost overshadowed by the other reason, Global slowdown. Global slowdown has been indicated by the Eurozone recession which has not yet shown much of the positive signs of improvement and the unemployment status of the United States of America supported by China cutting its fuel prices for the first time since July.

Middle East tension has increased to its utmost level with the deepening conflict between Israel and Palestine. Palestinians have attacked with a missile at Tel Aviv in Israel about which Israel is furious and will make Palestine pay for it. They have called up more militant forces to start up a military operation against Palestine.  The condition is pathetic now as 3 Israelis were killed by rocket attacks and more than a dozen have been killed by Israeli military operation named Pillar of Defense.  This has fueled the imbalance of demand and supply of crude oil in the global market. As the oil refineries in the Asia region were under maintenance, they are also back and OPEC is to increase the exports by 700,000 barrels a day which will worsen the situation as USA and Eurozone are going through the most difficult phase of their economy.

As a dim positive feel, France and Germany have shown a small expansion by 0.2 percent but on the whole, the Eurozone has slipped down by further 0.1 percent. The worst part is the political and economic experts still do not see good signs of improvement or recovery. In USA, manufacturing has declined and unemployment has gushed to the highest. Due to this, Crude Oil inventories are increasing day-after-day and rose by 1.1 million barrels which will again bring the crude oil prices further down.

On an addition to all this, China, the second biggest oil consuming nation, has also cut its fuel prices threatening the refiners to reduce the processing margins. The political transition going on China may have some part to play in it but whatever it is, the sign is not good economically. There were price hikes seen in August and September, but now this sudden instruction to decrease the prices will bring the refiners to a big loss and the Chinese government, in the long run, definitely has to address this issue for public welfare.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.