If you follow the oil markets closely, you might be feeling a bit motion sick these days. To call the path of crude oil prices over the last nine months “volatile” would be putting it mildly. Benchmark West Texas Intermediate crude rallied at the beginning of last autumn, hitting a peak of $76.41 per barrel on Oct. 3. From there, WTI plunged, reaching a low of $42.53 the day before Christmas: A decline of 45%. Then, crude started a new rally as 2019 began, eventually zooming back up to $66.30 on April 23, for a gain of 56%. Since then, it has fallen back to about $53, for a loss of roughly 20%. Nauseous yet?
What’s been driving all these ups and downs? Two competing narratives of under- and oversupply. The first, which prompted last fall’s big rally, held that the world would soon find itself short of oil because of the strong global economy and looming U.S. sanctions on Iran’s oil industry, which would take key barrels off the market. But when Washington waived some of those sanctions, the market suddenly looked oversupplied, and oil prices tanked. Not for long, though: Anticipation of strong oil demand and concerns that oil exports from Venezuela and Libya would shrink sparked a new rally that lasted through the winter. Then, this spring, investors grew nervous that various trade disputes would weaken the global economy enough to sap oil demand, and prices once again dropped. Continue reading “What’s the Next Stop on Oil’s Wild Ride?”