NISM Certifications · NISM-Series-XV: Research Analyst · Fundamental Analysis of Commodities
Which of the following is most likely to cause the price of crude oil to rise, other things being equal?
A production cut by major oil producers while demand remains steady is most likely to raise crude prices, because supply falls relative to demand. Higher inventories, weaker economic growth and electric vehicle adoption all increase supply or reduce demand, pushing prices lower.
- AA decision by major producers to cut output while global demand is steadyCorrect
- BA significant rise in global inventories and shale output
- CA global economic slowdown reducing fuel consumption
- DA rapid shift of transport fleets to electric vehicles
Explanation
A supply cut with steady demand shifts the supply curve left and raises price. The other options either increase supply or reduce demand, which pushes prices down.
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