Fasten your seat belts. Dramatic swings in the oil market may soon become the norm.
After a prolonged period of low prices and relative calm, oil watchers are predicting a surge of volatility following President Trump’s decision to reimpose sanctions on Iran. Crude has spiked 19% this year, to prices unseen since late 2014.
Taking away Iranian oil — after production cuts by Venezuela, Saudi Arabia and Russia — effectively means the margin for error in the market will become razor-thin.
In 2015 and 2016, there was so much supply that crude prices crashed. Now that buffer has been worn down so much that the market is extra-sensitive to geopolitical dangers and other shocks.
But that’s not all. Other powerful drivers are likely to jerk oil prices around, including the resurgent US dollar and a surge in production from Texas shale fields.
“Without a doubt, there are a variety of forces that could upset the balance and move us into a more volatile period,” said Ben Cook, portfolio manager at BP Capital Fund Advisors, an energy investment firm.
Analysts are already warning of an eventual return to $100 oil. That’s a remarkable swing considering that crude crashed to just $26 a barrel barely two years ago. Others are sticking by predictions that oil prices will come back to earth soon.
via CNN
