Oil: How low can it go?

Despite a sizeable fall, crude oil prices are still within their trading range … and are likely to remain there barring any major catalysts.

Summary: The key US crude benchmark, West Texas Intermediate, has fallen 20% to around $US85 a barrel over the past four months. The market fears it will fall further as global growth supposedly weakens and the US provides excess supply, potentially creating a price war with OPEC. However, the rhetoric on the world’s growth is over the top when considering actual growth outcomes, and any price war will be restricted by the US as a higher marginal cost producer.


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