Home » Business, Employment, Financial Market, News & Current Affairs, Personal Finance » Lao K:The relationship between International Economy and Oil Price-How Seasonal Causes affect Oil Price

At the end of 2015, Federal Reserve announce the decision to raise interest rates, which stands for the beginning of normalization of American monetary policy. Moreover, in recent FOMC (Federal Open Market Committee) meeting, the Federal Reserve president Yellen indicates that in the year of 2016, the Fed might conservatively raise interest rates twice. The change of monetary policy is based on the recovery of American economy. In this case, Fed decided to make such decisions to support a normal and healthy development of the economy. Moreover, to prevent possible consequences caused by overheated economy and the rise of interest rates. However, the path toward currency’s normalization haven’t end yet. American economy is still at certain level of risk. But according to recently announced related American economic data, the situation is fairly positive.

Due to the explosion of American economic crisis in 2008, which resulted in the obvious problem of international economy, world economic entities like Europe, Japan and China had one after another relative big economic problems. Furthermore, there is one similarity through the world economic developing history, which is what Fed had took action, quantitative easing. Generally speaking, it means keep printing money and put them into the market to stimulate economic development. Economic entities like Europe, Japan and China undoubtedly use similar methods dealing with likely situations. So in recent years, world economy have been keep using relaxed quantitative easing policies to stimulate the market. Currently as Fed started to raise interest rates, which stands for a steadier development of all world’s great economic entities, the future development will stay in similar pattern. Fed is just the beginning. What matters the most is that a better vision in world economy signifies a growing consumption of crude oil. Historically the crude oil price became very cheap when economic crisis occurred. On the contrary, during the time when economy goes up in fast pace, the crude oil price would rapidly increases. Today the world economy is going stabilized and gradually growing, the oil price, under the recovery of world economy which will lead to an increasing consumption of the product, has the possibility to grow in the future.

Currently the world major economic entities are located in the north hemisphere. The golden season of north hemisphere’s economic development is during the second and third quarter. So since the first quarter, the crude oil price started to increase gradually, and developed in the second quarter. Whereas during the transition from the third quarter to the fourth, the world economics’ slower developing pace would affect the growing trend of crude oil demands. Furthermore, it would affect the increasing oil price. Plus the advanced predictability of financial market on economic development, the increasing potential of crude oil market will start to drop off after July. And it’s fairly possible that the cruel oil price will fall into a decreasing cycle.

Therefore during the time working in the crude oil market, man should closely focusing on the economic and seasonal causes. The research and development department of Jin Yi Tong had grabbed the general trend of the oil market. We had made investing plans in terms of the first and second quarter for our customers. During the first quarter, we predicted the American crude oil index 6700 would raise from 35 dollars to 45 dollars. And we had reached the target. During the second quarter, we expected the price would rise from $44 to $52. Again we accomplished the goal within the predicted time frame.


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