5 Reasons Oil Prices Could Jump

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5 Reasons Oil Prices Could Jump

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Oil Prices Have Fallen Off a Cliff Oil prices are down around 50% since last summer and it’s starting to have an impact on producers and demand, which could mean higher prices around the corner.

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Capital Spending Cuts Oil explorers are slashing capital budgets to stay alive RBC Capital Markets expects global capital spending to drop 20% to $349 billion in 2015 Moody’s expects capital spending to fall 41% in North America Eventually, this will lead to lower oil production and ease the industry’s oversupply of 1-2 million barrels per day

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OPEC May Be Tired of Low Prices OPEC will lose an estimated $257 billion in 2015 because of low oil prices and it makes short-term economic sense to cut production now. The cartel could raise oil prices by cutting production by 1-2 million barrels per day, something its smaller members are already pushing for.

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International Unrest After a decade of wars, revolutions, and terrorism that impacted oil production in Iraq, Syria, Libya, and elsewhere the last two years have been relatively calm, coinciding with the oversupply of oil. That could be changing with unrest in Yemen and ISIS spreading into Iraq and Iran. If international unrest impacts production prices could rise quickly, like they did last week.

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Bigger Cars and a Better Economy With oil prices near $2 per gallon, SUV sales have skyrocketed in the U.S. As a result, after a decade of declining oil consumption, we’ve used 4% more oil in the first two months of 2015 than we did a year ago.

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China and India Could Boost Growth One of the fears that has driven oil prices down is slowing growth in China, which would lead to lower oil demand If China’s growth stays strong and India continues to grow at 7-9% in 2015 they’ll increase demand for oil This is key because they’re in the top four in oil imports globally

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Will Oil Prices Jump in 2015? We don’t know exactly where oil will be at the end of 2015, but if these factors play out prices could rise dramatically. For consumers and investors there are literally billions of dollars on the line and Middle Eastern conflict, growth in Asia, and cost cuts in America may decide where oil heads from here.

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