In 2014, oil saw one of the biggest declines in its value in history. However, for most of 2015, oil's been back on bullish trends; doing what it can to recover. Well, that is up until July. The month of July has been exceptionally bad for the commodity. More importantly, it's likely a sign of more declines to come. Today, we'll talk about why we're seeing declines in the value of oil, whether or not declines are likely to last, and how binary options traders can profit from the trends. So, let's get right to it…
What Is Causing The Value Of Oil To Decline
In the month of July, we've watched as the value of oil started to fall. However, it wasn't just one issue that caused the declines; there were several factors that played a role. Here are the most influential factors that helped to lend a hand to declines…
Chinese Market & Economy – Throughout the month of July, more and more questions have been raised about the health of the Chinese market and overall economy. Unfortunately, things just aren't looking great. As a result, demand for oil in one of the largest economies in the world has started to feel the pain. The simple fact is that with the already present supply glut, oil simply can't maintain value if one of the world's larger economies can't maintain demand.
There's Still A Massive Supply Glut – In 2014, the reason for the huge decline we saw in the value of oil surrounded a supply glut issue. The world was producing more oil than it was consuming. As a result, the price of oil had to fall in order to push consumption and low production. While production has slowed quite a bit and consumption of the commodity is up, it's simply not enough. The world still produces 2 million barrels per day more than it uses. So, while the price of the commodity did see gains in the beginning of the year, the supply glut never actually went away.
Iran's Oil Gates Could Open – Iran has one of the largest oil reserves in the world. However, for a couple of years now, Iranian oil simply hasn't seen the market. That's because the United States placed sanctions on the country for the enrichment of uranium and activity in the creation of nuclear weaponry. However, earlier in July, the United States and Iran came to an unprecedented agreement. While sanctions haven't been lifted quite yet, they are expected to be lifted. When this happens, Iranian oil will flood the market; adding to the current supply glut by what experts estimate to be around 500,000 barrels per day by the end of the year and possibly 1 million barrels per day next year.
