Declining oil prices good for the U.S. economy?

Declining oil prices good for the U.S. economy?

The Schork Report publisher Stephen Schork on the outlook for oil.

Oil price forecast 2017
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Oil price forecast 2017

Today is Wednesday 28th December 2016 and we are briefly commenting on the forces likely to affect oil prices in 2017.

As we reported recently and which is now common knowledge, the world has faced an oil glut mainly caused by OPEC having no agreements on output and the considerable amount of oil produced by US Shale Oil Producers all of which has caused Brent crude oil prices to fall from over 5 per barrel in June 2014 down to a barrel in Jan 2016 and are now standing at a barrel after this month’s OPEC/NonOPEC production agreement.

The question many people are asking is where are prices likely to go from here and what will influence them?

Well the answer is, that it all depends upon whether OPEC and Non OPEC countries stick to their agreements or not. On 30th November OPEC members agreed to cut oil production by 1.2 million barrels a day. On the 10th December Non OPEC oil producing countries in discussion with OPEC Members, agreed to cut production by 600,000 barrels a day.

Analysts believe that if these cuts go ahead as planned from January 2017, then we should see an eradication of the surplus supply much of which is currently stored in super-tankers; 40 of which are sitting off Singapore’s coast or in nearby Malaysian waters. If this occurs, we could very well see oil prices rise to – a barrel.

However there are a number of factors which suggest that the Agreement may not hold:

• Iraq for example may need to increase funds to pay for the cost of its war with ISIS
• Iran, which has been subjected to severe trade embargos will be looking to earn as much revenue as possible to reflate its economy
• US Shale Oil producers which have cut back production because of the low price may increase production again as prices continue to rise.

In addition we should also not forget that China’s economy has for many years been the second largest oil consumer in the world following the US. If its economy falters in 2017 then this is likely to have a considerable impact on prices too.

Finally we must not forget President-elect Trump’s policies, which at this moment we have little idea as to how they will affect oil prices until they are announced.

It goes without saying that the value of the dollar also determines price per barrel as oil is still predominantly purchased in US dollars. We are assuming for 2017 that continued dollar strength will to some degree maintain the status quo as far as its effect on oil prices are concerned.

Our view and best estimate at this stage, is that production limits will be adhered to for at least a few months but we are quite frankly not too optimistic about them holding throughout the entire year. Yes oil seems to be reasonably pegged at and could rise to mid ’s. Much beyond that we doubt unless of course there is some International crisis or an increase in conflict in war torn areas of the world.

So to conclude, subject to the proverbial black swan turning up, we shall see oil prices throughout 2017 vacillating between – in the main.

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21 thoughts on “Declining oil prices good for the U.S. economy?”

  1. 60+ was wrong. They did cut supply, but us shale production and other production held the glut. It's probably on the way to 40 and below. Trumps administration has had no effect. China's demand is remaining low, increasingly because of renewable energy. Middle East crisis has had no effect. US dollar remains an insignificant vector for price change

  2. Nearing the end of June when our heating oil 'lock in' price (budget plan) is set for 2017-18. 2016-17 was $2.16 gal. and saved us. Praying for a REPEAT 😓

  3. The problem with a cartel is that many members say one thing, but do another. Most of these countries are hurting (compared to recent high times) and are motivated to generate as much cash as possible. I agree with your forecast. Oil prices will continue to be moderate for 2017 UNLESS there is some sort of international event.

  4. F(at)(at)(at) that we need $200.00 bbl so I can charge the f(at)(at)(at) out of them oil companies

  5. The value of the pound sterling is very much linked to the price of oil, the higher the price of oil the higher the value of sterling, and that is because London is so dependent on Middle-Eastern oil money invested through it. The ruling aristocracies of the Middle-East don't have to seek approval from their countries' populations on how they invest their countries' wealth and so can take a huge percentage of their countries' capital and invest it through London. And, they're not just driven by economic considerations, where they invest their money is mainly a political choice. In the United Kingdom we do not live under a democratically elected government, the House of Lords is very powerful and not elected and so the Sheikhs of the Middle-East like the United Kingdom. The United Kingdom is closer to the Middle-Eastern model of government, one run almost exclusively for the benefit of an elite, than any other Western country. Higher oil prices will inevitably, at least in the long-term, lead to a higher value for the pound sterling. If the price of oil goes up then so does the value of the Sterling.

  6. I hope like hell that Trump will open up the energy sector in the USA. If he's able to do that by getting around Obama's recent land mines, tons of jobs will be created and Americans will benefit. Relying on terrorist countries that hate us for energy is ludicrous. Lower gas prices is one of the single most powerful things that can super charge the economy. Everyone is affected by gas prices, either personally by purchasing fuel and/or the price of goods (trucking/rail) being transported. Lowering fuel prices is a HUGE shot in the arm for the economy! The more $$$ we have in our pocket, the more we can spend on goods and services! Consumer spending accounts for about 70% of driving the economy. That's US!

  7. I hope we see high enough prices that my Oil and Gas Royalty Trust investments start producing income closer to what they did several years ago, as I will be retiring in a few years. Good thing I'm diversified. Smaller incomes from multiple sources Trumps having all ones eggs in a single basket. I don't want to have to keep an eye on the basket 24/7.

  8. I got out of my oil fund stocks several years ago. The price was over a hundred dollar a share and then it took that express elevator to the bottom $20.00 Level. Excellent video but i think oil prices will remain around the $50.00 or a much lower level for a while. Out

  9. I stumbled across some very intriguing information. Platinum Group metals are being rendered from Shale oil. miss me shine a light on what companies are willing to incur the expense added expense of fracking as opposed to Conventional Drilling. the fracking industry is not only an oil operation but also a mining operation at the same time. What kind of an effect could this have on pgms going forward?

  10. In the past the metals markets have moved in the same direction as oil but with a four-month lag period.

  11. Lion's Share of isis's money comes from the production of oil which that production I assume will halt completely after the 20th of January or shortly thereafter leaving a vacuum of market share to produce into.

  12. Food for thought my fellow speculators. Corporate lobbyists within Trump's transition team include representatives for Altira, Visa, Coca-Cola, General Electric, Verizon, HSBC, Pfizer, Dow Chemical, and Duke Energy…and Exxonmobile CEO Rex Tillerson is joining Trumps cabinet.

  13. Illuminati Silver , please watch this link, it is a warning from God to you it is a prophecy which I am giving you with great great details which includes names, places, dates and events.
    the prophecy also says that Britain and the United States will be the first ones who will exit the UN!
    Britain was the first one and the United States which is to come.

    please watch this for greater details which will happen in our lifetime :

  14. There are hundreds of tankers full of oil more than a year now. It will take 2 years at least to empty them all the market is rigged.

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