By Emre Gurkan Abay
ANKARA
Oil prices are determined by financial markets rather than the supply and demand equilibrium, experts said Tuesday.
“The world’s daily oil production is 94.21 million barrels. While in October 1.43 billion barrel bonds have been traded daily in the London and New York stock exchange markets,” Sohbet Karbuz, director of Hydrocarbons division in the Mediterranean Observatory for Energy told The Anadolu Agency.
“In other words, 17 times more oil is being traded daily than the world’s actual oil production,” he added.
The American benchmark for crude oil price has dipped below the $60 per barrel mark, the lowest since July 2009.
“The massive amount of money in the financial markets can slip to other investment areas within seconds," Karbuz said.
"Since last June, there are more sellers than buyers both physically and in the oil bond markets. This creates a downward pressure towards oil prices,” he asserted.
He explained that speculators in the financial markets have been selling huge amounts of oil bonds since July and added that the “big players” in the financial markets can decide anytime when oil prices are low enough and enter the oil markets once again to buy oil bonds at economical rates.
“Oil prices are mainly determined by the financial markets since 2001,” Volkan Ozdemir, head of the Institute for Energy Markets and Policies said.
Ozdemir underlined that oil demand has only stalled, but not decreased since June, and maintained therefore that the 40 percent loss in value of oil prices cannot be explained by the supply and demand equilibrium.
“The main element while determining oil prices are the developments in the global financial markets and they are the reason behind the market speculation conducted by the investment banks,” Ozdemir said.
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