Oil Prices Set To Increase

January 10, 2018

After years in the doldrums, signs are emerging that oil might be in line for a comeback, nearly four years after its value fell dramatically in mid-2014. With Brent Crude recovering to $65 a barrel on a generally upward trend, thoughts will turn to the $100 a barrel days before the price crash, which saw its value plummet to $40 by the end of the year.

Drivers Of Price Increase

This month’s rally is likely caused by the recent civil unrest in Iran, OPEC’s third-biggest crude producer, which has caused tension in the markets over its ability to maintain its supply. However, this is only the latest in a series of events which have been steadily pushing the price of oil higher, including the ongoing row between the US and Iran over sanctions and the decision by OPEC to cut output.

Oil prices naturally fluctuate in line with output and world events, but traders will be buoyed by the approaching May 2015 intraday high of $69.63, which would mark a watershed moment for oil prices when it is passed.

Analysts JBC Energy have played down the effect of the Iranian protests on the long-term price of oil, with the Iranian government’s insistence that the industrial action does not threaten their production or export capacity, but the continued war of words between the Trump administration and Tehran remains an issue.

The new president’s attitude is in marked contrast with President Obama’s reconciliatory efforts, and the prospect of new sanctions will continue to affect oil prices for the coming months, while actual action on sanctions would likely have a larger effect.

Global Growth Boosts Crude

Other economic trends across the world are also having a buoying effect on prices, with demand soaring following positive economic data across the globe. With Asia’s booming economies in full swing, and the US and Western Europe returning to strong growth after a period of weakness, this growth looks like it will remain sustained. Similarly, cold winter weather across Europe and the US is likely to provide a short-term boost in the price of heating oil, which will remain in demand until early Q2.

Live Chart – Brent Oil


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Photo: Oil Barrels by Professor of Death licensed under Creative commons 5