During past few months, Oil prices are struggling hard to get back to their previous positions which use to be all time high. After the development of Shale gas by the US, OPEC countries are struggling hard to manage the demand supply and price equilibrium of crude oil. Speculations about the further downfall of the oil prices are made by some of the renowned analysts. Citi Group recently had joined hands with Goldman Sachs Group Inc. Considering the fact to believe in commodity market compared to the oil market that is currently suffering a huge setback.
OPEC countries are in the constant dilemma due to the continuous downfall in the oil prices and had cut down the production and supply to maintain a balance. The deal that was signed between the producers of oil was expected to sustain only for six to nine months but has been extended and expected to be continued until the end of this year. Investors are predicting a bullish market for oil in near future. With the continuation of the deal among the OPEC and Non-OPEC countries producing crude oil, predictions are made about the price to move beyond $60 per barrel.
Reducing the supply of crude oil in the market also had an adverse effect on the traders and middlemen. The production cut agreement forced traders to move the oil to offshore sites because it would be costly for them to store oil at the sea, thereby affecting their incentives. On the other hand, the US has been very motivated about the increased production and usage of the shale gas which is replacing the traditional crude oil in the current scenario with a record-breaking production in its first quarter of the year.
The downfall in the oil market has adversely affected the commodity market as well. But Citi bank and Goldman Sachs predicts a better future for commodity market in the second quarter. Citi bank also suggested that the first quarter might have been very critical for the commodity market due to various external factoring affecting the prices but still, the commodity market is expected to see a better sell-off in the second quarter. It’s seen that the commodity market grew by $45 billion during the month of January and February but saw a setback in the month of March by $35 billion.
According to the analyst, commodities like iron ore, copper and steel would be the major contributors to improve the current struggling conditions of the commodity market and take it to profitable place by the end of this year.