The Recent Slip in Oil Prices

Last week, NYMEX oil prices slipped almost $15, the biggest ever single-week drop. Brent crude also posted similar result. The largest single-day drop was recorded on Thursday. This may not be long-term, however.

Geo-political unrests in many oil-producing countries are hurting supply. In Libya, the stalemate caused more than a million barrels of crude to be off the market everyday.

On the demand side, as developing countries become ever more wealthy and the size of their bourgeoises expand, more cars will be owned world-wide. Unless the automobile industry can produce clean-energy vehicles at an affordable price quickly, demand for gasoline, thus oil, will increase with the expansion of international car ownership.

The fundamental demand and supply structure for oil hasn't changed. It is better to think of the recent price fall as a correction rather than a long-term adjustment.