Carson Fitch have published their findings on the demand fundamentals effecting the recent surge in demand in the oil market. Emerging economies have caused natural commodities like Crude Oil to soar in price again recently. The recent increases in manufacturing levels in countries like China, India, and now most recently the U.S, whose economy appears to be back on track, the demand for Energy commodities, in particular Crude Oil, has increased.
Furthermore, consumers in countries like Latin America, China, and India are buying more motor vehicles, something that only 5 years ago was unheard of, so the demand in Crude Oil is rising at an unprecedented rate. In China, new car purchases were up by 37% this year from 2012 and by 27% in India.
Also, the increase for demand from agriculture has now caused farmers to increase their crops to supply whichever commodity is most sought after on the market. The higher demand a commodity has, the higher the farmer will be able to sell it for. Some examples of profitable crops are soybeans and corn, which rose in demand as demand for ethanol based products increased.
It is estimated that most arable farmers in the US have greatly increased their acreage over the past decade to keep up with the increased demand for grains and therefore increasing their demand for crude oil. As the acres continue to increase, the price will continue to go up as demand is needed.
China has immediately begun to create stockpile inventories of oil while they still believe the price to be cheap. This panic buying is starting to stretch the supply fundamentals of the commodity. Additionally, India is now creating a similar stock holding facility.
The price of Crude has gone up 7% already this year, and is now set to extend this gain further over the coming months. So far, it is one of the year’s best performing commodities in the market. Nobody knows what will happen to it in the future, apart from that it is going to go up in price. Its 2008 claim to fame, when it hit almost $150 a barrel, maybe with us again soon.
Crude is also going to be affected in the coming months by the Chinese government’s attempts to speed up their economy to a level that puts them ahead of the Western world again. It remains to be seen where oil will rise to, or if it will again test the $150 mark which many analysts believe possible soon. The recent momentum has been almost unbelievable, so many investors are looking forward to the months to come, so much so that their optimism is extremely worrying for those not in the market.
About Carson Fitch
Carson Fitch (carson-fitch.com) specializes in identifying and exploiting opportunities in the Commodity and Off-shore Markets for corporate clients and Managed Account Programs for institutional as well as individual investors. As a prospective client you stand to benefit from over 17 years of experience and expertise in the global financial markets with extensive knowledge in both technical and fundamental analysis.