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NISM Certifications · NISM-Series-XV: Research Analyst · Fundamental Analysis of Commodities

Which factor would most directly be expected to raise the price of crude oil in the near term, other things being equal?

A production cut by major producers while demand remains steady reduces supply relative to demand, which tends to push crude oil prices higher. Higher inventories, weaker industrial activity and substitution all weaken demand relative to supply and would put downward pressure on prices.

  1. AA decision by major producers to cut output while demand stays steadyCorrect
  2. BA sharp rise in global inventories
  3. CA significant slowdown in global industrial activity
  4. DRapid adoption of substitutes at scale

Explanation

Lower supply with unchanged demand creates a shortage and pushes prices up. Rising inventories, weaker industrial demand and substitution all reduce demand relative to supply and tend to lower prices.

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