Oil Prices Plunge

Oil Prices Plunge
Oil Prices Plunge

Oil plunged last week after both Saudi Arabia and Russia indicated that they will increase the supply of oil to the market in the second half of 2018.

As the price of oil has increased over the last 12 months more oil producers have entered the market or ramped up their production increasing competition for these big players.

Some of these producers have a minimum breakeven point to make production viable and if Saudi Arabia and Russian can hurt them by pushing the price down temporarily they will happily oblige.

The price of oil fluctuates based on supply and demand. Is this situation Russia and Saudi Arabia have only said they will increase production but have not did it yet.

This is how the market work, traders are pricing in future action and this future action means oil will fall so they sell now.

Add to this the fact that high oil prices pump up inflation and can have a negative impact on global economies. When it costs more to fill a car, consumers have less to spend in the real economy so a cooling of oil prices is welcomed by many.

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