As indicated by ESCWA (2009), the output cuts instituted by OPEC countries culminated in significant slumps in the revenues. These cuts in oil prices motivated investors in oil commodities markets to liquidate their position leading to huge loses, with the main reason being the drop in confidence in the market to sustain such levels of demand in the long-term.
With the demand for oil dwindling, the prices of these commodities were bound to follow suit, forcing most rational investors to liquidate at the earliest opportunity as observed byTaylor(2008). However, the concerted efforts to liquidate their positions led to reduction in the value of energy commodities market, thereby influencing the ability of the market to operate.
Once the demand is restored, price levels are bound to revert to original levels owing to restoration of output levels hence the demand for funds to finance the commodities markets. Similarly, the slow growth in the production levels of both OPEC and non-OPEC regions is bound to contribute to the increase in oil supply. Lastly, with the successful institution and implementation of the stimulus package, the global demand for oil is bound to expand, thereby leading to an increase in the revenues from oil and related products.
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