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

Which of the following is generally most likely to push crude oil prices higher, other factors remaining constant?

A production cut by major oil producers is most likely to raise crude prices because it reduces supply while demand stays unchanged. Rising inventories, an economic slowdown and substitute energy adoption all weaken demand relative to supply and push prices down.

  1. AA decision by major producers to cut output quotasCorrect
  2. BA sharp rise in global inventories
  3. CA global economic slowdown reducing demand
  4. DRapid adoption of substitute energy sources

Explanation

Cutting supply by lowering production quotas shifts the supply curve left and raises prices if demand holds. Higher inventories, weaker demand and substitution all reduce demand relative to supply and tend to lower prices.

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