The tendency of the price of oil to fluctuate tumbled to a record in the wake of speculation that soaring crude supplies in the US and extra output capacity in Saudi Arabia will curb any shortfalls following strengthening economies.
The historical volatility for the last 20 days of Brent crude slid to 8.1% as of 3 pm in London on Friday, on course to be the lowest since 1988 when the future entered trade in 1988, data prepared by Bloomberg showed.
Spare capability for production in Saudi Arabia and increasing US output of crude from shale-rock structures are standing in the way of price hikes, as solid rebounding of the global economy and continued bond purchases by the Federal Reserve prevent a tumble, according to BNP Paribas SA.
“It can be taken as a sign that markets are deemed to be in equilibrium, with no clear fundamental imbalances,” Olivier Jakob of Zug, Switzerland-based Petromatrix GmbH told Bloomberg by email.
Brent futures have hit lows of $103.95 per barrel and highs of $112.39 in 2014. However, the futures went as high as $147.50 and as low as $36.20 in 2008. The International Energy Agency, whose analysis is utilized by 29 nations, predicts that trends in supply and demand will be monitored closely.
Barclays Plc anticipates that oil markets remain less susceptible to supply shocks because there is surging US shale output.
Speculation that prices will stay flat for the most part is preventing consumers and producers from taking part in exchange of futures. Although volatility has declined, BNP Paribas SA said there are ways to cash in on the reduction in fluctuations.
According to a poll of Reuters involving 28 analysts, the per-barrel price of Brent crude for 2014 will be $105.90 on average. The projection is below the $108.19 average worked out so far this year.
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