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Crude Oil’s Price drop

Crude Oil’s Price drop

One of the most talked-about topics in the past year and a half has been crude oil. It has taken a calamitous drop from around $115 a barrel to around $28 in the space of about 20 months, shedding in the process some $87 or 75% of its value. The plunge has unsurprisingly caused severe financial difficulties for oil-exporting countries, which in turn has hurt the value of their stocks, bonds and currencies. On top of this it has also created global disinflationary pressures, causing some economies to fall into deflation. Consequently, the drop has had a big impact on the monetary policy decisions of almost all the major central banks, leading to increased volatility in equities and FX markets. But how low can it go? Are we about to see a bottom for oil, or are prices set to stay low for the foreseeable future? Whatever direction crude takes, it will almost certainly have major implications for the wider financial markets.

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