Posted on 08/19/2015 10:26:51 AM PDT by Citizen Zed
Oil prices will stay low for years to come, derivatives markets say, keeping a lid on inflation and helping boost global growth.
Oil has more than halved in value over the last year, thanks to huge oversupply, and many oil companies, particularly in the United States, say they may soon have to rein in production, tightening supply, unless the market recovers.
That has led many analysts to predict that oil - on average around 5 percent of companies' costs - will see price rises later this year or in 2016, pushing up inflation.
But oil derivatives tell another story.
Contracts for delivery of crude oil in the future on the big commodities markets such as the New York Mercantile Exchange and the InterContinental Exchange show the price of oil in five years' time has collapsed in recent months.
U.S. crude now costs around $42 a barrel for delivery next month, and only about $20 more for delivery in 2020.
Prices of oil for future delivery are usually much more stable than volatile near-term prices, holding their value even when the spot market crashes.
But the recent oil-price rout looks different.
Prices for all futures months for years to come, also known as the futures price "curve," have come down sharply.
"The curve is saying prices will stay low for some time," said Amrita Sen, oil analyst at consultancy Energy Aspects.
Futures prices are not forecasts, not least because liquidity tends to be low for long-term forward contracts.
But they are good indicators of sentiment because they are a market where speculators bet on forward prices, and also allow large producers and consumers to hedge future business.
(Excerpt) Read more at cnbc.com ...
RE: Get used to cheap oil, derivatives markets say
Well, I’ve suffered for nearly 7 years. It’s about time.
BTW, Where are the “Energy Companies are Manipulating oil prices” conspiracy theorists when we need them?
Bill O’Reilly are you there???
Cheap oil does NOT keep any lid on inflation. If there is no inflation but rather there is a stable money supply a cheaper price for oil would lead to higher prices for other goods and a higher price for oil would do the reverse. Cheaper oil DOES make for higher prices in the rest of the economy because there are more dollars being spent elsewhere. Oil becoming cheaper does not destroy the dollars that would have been spent on costlier oil. Cheaper oil means cheaper transportation and production costs but not necessarily cheaper retail prices. Price levels and price inflation are a reflection of the number of dollars chasing each unit of production, i.e. the total number of dollars in circulation. In a vastly interconnected world economy the major producer and controller of the world financial system exports much of its inflation to other countries. Prices rise for some things or everything else when a major price declines.
Well I saw this wisdom from USAToday:
“Republicans talked endlessly about drill baby drill but it was Obama that made it happen.”
And a lot of LIVs will believe it.
Ho-hum....
Some shiny new Bernie Madoff has figured out that he can SELL a “future promise” to deliver a barrel of oil to the “buyer” in 10 years for $20.
The buyer plans to sell that barrel (and many others) for $30 each to a greater fool and thereby grab a quick 50% profit for himself.
SWEE-ET! But has anyone bothered to identify the “seller” of the oil? No?
Is it Russia? Iran? ISIS? Venezuela? George Soros? Baghdad Bob? Josh Earnest?
So many scams involve trading some money now for a promise of lots of money later.
In California the gas prices go up when the oil price goes down. All due to higher gas taxes.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.