Oil Spills Over
Breaking news out of the oil markets, we have too much! The price of oil just sunk 4% as investors connect the dots between what oil we have and what oil we need.
It’s a big, wide, world of oil out there. From West Texas Intermediate oil to the sour Mars and Mexican Maya blends, to the quality Tapis drilled in Malaysia. It’s Brent Crude oil, though, which is the black gold many investors use as the benchmark. The U.S. Energy Information Administration just checked Brent Crude oil levels with a dipstick, and while the market expected a decline of half a million barrels, the reading showed an increase of over 2 million.
A booming economy full of people demanding transport would guzzle that oil up, absorb it, leaving no oversupply, no sweat. However, the economy has been showing stress marks recently. Big-time energy investor, John Kilduff, points out the “constant concern about the demand outlook” because of trade tensions. Such trade tensions have sparked investor tensions in the oil market as, put simply, the government’s data shows we have too much in the tank.
Too much oil relative to our needs means cheaper oil, as it’s no longer a scarce commodity. We’d all love cheap gas, and industrial companies too could burn through more Brent for their buck. However, investors beware, it’s all relative to our needs. Our demand will drop as the economy slows, and firms moving both goods and people get less busy. In other words, as stocks enter a downturn. This is not an enviable time to own oil drums full to the rims, which produce nothing. That’s why the price just tanked 4%!
