Oil’s Slick Upward Move
When gluts of oil flood the markets, it causes a right mess. Fearing a spillover, the oil barons of the world just agreed to cut their refineries some slack. The timing for investors? Perfect.
First thing’s first; demand. Countries call for oil in a booming economy as folks bustle around in gas-guzzling planes, trains, and automobiles. Second thing’s second; supply. Countries call on their fantastically reliable, international partners, Russia, Iran, Iraq, and Saudi Arabia, to supply oil. Shocker, we know, but oil is volatile. Striking a perfect balance between supply and demand is no mean feat, but it remains the razor’s edge that oil prices teeter on.
Sit-rep… Investors have spent most of 2019 worrying about that balance. The US and China commenced the year by accelerating their game of chicken with trade, with growth slowing around the world. Economic fears and fading oil demand meant all eyes turned to “OPEC” to come in and save the day, and negate an oversupply.
The ‘Organisation of the Petroleum Exporting Countries’ is Earth’s oil cartel. If you’ve got oil, you can join the club. The elite 13 countries enjoy occasional get-togethers where they try to police oil supply. Notice a Brent bump in recent days? OPEC just made a play, agreeing to cut back production of the black gold for 9 months, and compounding that, both of the world’s two largest economies also got back on speaking terms!
These factors, with the former lowering supply and the latter raising demand, created a money-making pinch on Monday for oil owners as we neared an oily equilibrium again. But we know how quickly things can change, so don’t be too hasty in counting your chickens yet.
