FTSE100 Index futures prices have dropped amid rising inflation concerns. This situation is being attributed to the higher than expected fall in oil prices on the back of an ongoing global economic slowdown. The index Futures sector is now expected to show a downtrend, dipping as low as 4.5 percent. This comes as a negative signal to investors who had been betting on higher margins for the market. Now that the uptrend has reversed, and investors have re-allotted their losses, the futures market will experience a temporary reversal as well before recovering later this year.
The recent fall in crude prices has had a ripple effect on the futures and options markets across the world. Over the past few months, oil prices have continued to fall to new record lows as a result of oversupply, weakening demand, and increasing production of oil in the United States and other places around the world. The price drop in the FTSE100 Index, though temporary, has sent shockwaves through the financial market all around the globe. However, analysts have chalked it up to the changing perceptions of investors regarding oil, and its impact on the economy.
Over the past several months, there has been much talk about the impact of falling oil prices worldwide on the economy. However, most analysts do not agree that the FTSE100 Index would suffer. The index itself is doing quite well, with over one hundred and forty percent gains over the last twelve months. One of the concerns that analysts have about the market is the fact that many of the major oil producers such as Royal Dutch Shell, Exxon Mobile, and BP have not increased their stocks in the stock market since the market first took a hit.
Oil prices have taken a beating because of the recent global financial crisis. The United States and other key countries in the world have cut their budgets for the year, forcing oil companies to reduce their operations and increase their dividends. This has sent oil stocks in a freefall, with companies like Royal Dutch Shell dropping as much as seventy percent over the last two months. Even though the FTSE100 is currently holding its own, many analysts believe that the market may continue to fall. They point to the rising inflation as the reason why, saying that high inflation is one of the main concerns for investors in the oil market.
Oil companies are feeling the heat from the global recession in much the same way as other industries. Inflation worries are also starting to take a toll on the American economy. Many economists believe that the U.S. is already at risk of a “double dip” recession, where oil prices will double or even triple before they start rebounding again. In addition, many in the financial market are also worried that the Bank of England may intervene in the economy by lowering interest rates. This, they say, could cause the BoE to hike up the base interest rate from its current record low.
All the signs so far point to a global slowdown in the oil market. However, analysts in the oil and gas industry predict that prices will not stay low for very long, especially if the world’s economies improve in the next few years. According to analysts, the key to predicting which way the oil prices will move is to understand the fundamentals of the industry. For instance, they argue that the industry will continue to grow for years, despite an economic slowdown, provided that oil companies take major cost cutting measures and invest in new oil fields.