Oil prices cheer Ukrainians up once again

Over the past week and a half, the price of WTI crude oil has dropped by 9%. Price weakness accelerated on Friday and today – the price fell by more than 6.0%.  The oil price movement over the past four months is starting to look like a perfect “dead cat bounce”: the price bounced off its US$43.5/barrel low in mid-March 2015 to above $60/barrel in May-June and has been slipping since late June to about $55.5/barrel now.

Ukrainians all over the world have been watching oil prices closely for more than a year now, ever since the start of the Russian invasion. Ukraine is a net importer of oil and gas, while at the same time these industries constitute a vital source of revenues for Russia’s economy. On the back of the accelerated decline in the Russian economy (the country’s GDP dropped by 4.2% in April and by 4.9% in May 2015) and geopolitical troubles for Russia (like today’s proposal by the Dutch Prime Minister Mark Rutte to establish a tribunal to prosecute the suspects in the MH17 disaster), the latest oil price decline is giving Ukrainians one more reason to be optimistic.
The current price decline is caused by the fact that the number of U.S. oil-drilling rigs rose by 12 to 640 in the past week which ended the 29 week - long downward streak (Baker Hughes via marketwatch.com). During the period of lower oil prices, the rig-count had been falling. However even during this period the U.S. oil output has remained quite strong. Additionally, the deadline to reach a nuclear deal with Iran expires next Tuesday. A final agreement would eventually allow for the release of more Iranian oil into the global market. These facts and expectations are signalling that oil prices may remain under pressure in the foreseeable future.

Ukrainian Credit Union Limited