The recent ongoing crisis in the financial market has been settled down to a great extent since FED is going to hike their interest rate in the month of December. The price of oil is significantly low in the global market as producers are not limiting their oil production. Though Vladimir Putin tried to push the price oil a little bit up in the market with the help of closed Middle Eastern leaders but the market didn’t anticipate as his expectations. Currently the price of oil CLF7,-4.17% is now trading at $46.The new elected president Donald Trump is also trying to push the price oil very hard the stubborn market is not yet ready to react to any sort of political statement. The recent findings of the massive oil and gas in the wolf camp shale formation near Midland, Texas is also limiting the rise in the price of oil to a great extent. Though there has been a strong rally in the stock market as the newly elected president Donald Trump gave some hope in the financial and forex market but considering the long term effect the fundamental factors is bound to win.
The new discovery in Wolf camp can provide 20 billion of barrels which are large enough to exceed half of the total national preserve in 2014.On the contrary, it might also provide 16 trillion cubic feet of natural gas in the upcoming days. Such a huge discovery might have a catastrophic event to the price of coal in the near term future. In the recent days the price of Natural gas NGF17, +1.30% dropped by 20.95% and investors are in fear since the price might fall more in the future. To be precise such a significant drop in the price of energy field has lowered the profit by 70% early in this year. Researchers are suggesting that the world economy might face its greatest catastrophic disaster in the energy sectors if things continue to move in such a fashion.
The recent upcoming OPEC meeting is going to pay a major role in the price of oil since they are trying to limit the production of oil per day. If they can successfully implement their plan in the global market then the price of oil will be stabilized to a great extent due to the production cap. But the leading oil production countries are in fear as the major policy makers of the OPEC has been divided into two groups just before the OPEC meeting. Iraq, Iran, Saudi Arabia and Kuwait will have to follow the supply and demand law if things go in a planned way in the OPEC meeting. On the contrary U.S president, Donald Trump is stated the oil company to drill more oil in the Federal lands which might make the oil market much more unstable. If the oversupply problem prevails in the market for a longer period of times then we are sure that the world leading economy will have a tough due to the unstable market situation.
According to the researchers the Canadian oil –sands, crude cost near about $84.35 whereas the world is getting a price $46 per barrel. This will also bring fresh bearish pressure in the price of the gasoline market. The energy SPDR ETF XLE, -0.49% has gained some bullish momentum in the market on the event of the U.S prudential election. On the contrary, Canada is switching to out of the coal-fired electricity business within 2013 in order to preserve the green world. Seeing this prompt action from the Canadian government all the leading economic countries including the USA is trying to switch to alternative power sectors. But technically Canada will be one step ahead of all other countries since the country’s half of the electric production comes from waterfalls. Canada uses only 10% coal in the electricity production whereas U.S uses more than 31.3% coal in their production.
Natural gas is traded at a rate of $6 per million British thermal unit which is much more effective than coal. Due to the unbalance of supply and demand law, the price of natural gas has sharply fallen in the recent days. Wind power is also one of time important power generating source in the US since 13 states directly consume the electric power produced by the wind energy. The price of wind power has also dropped by 9.95 % in the last week. If the government take proper initiate and give more emphasis on the wind and solar power then we might see a stable energy market in the future. On the contrary, there is no definite sign of recovery in the oil industry and leading producers are greatly depending upon OPEC decision.
The year 2016 has been packed with many important political events and if the leading leaders of the major economic countries fail to bring the stability in the energy sector then we might a see a catastrophic disaster in the field of energy for a long period of time. However, there is strong chance that the FED will hike their interest rate in the month of December. Investors are cautiously waiting for the interest rate hike decision by the FED in the next FOMC meeting minutes since will bring some stability in the financial market. According to the leading economist researchers of MIT, the FED will need a second hike in the year 2017 if they want to retain their financial stability in the global market. But in order to hike their interest rate for the second time, the performance of the U.S economy needs to be extraordinary from the very beginning of the year 2017.