Last month I drew attention to the fact that the WTI-Brent spread had opened to $7 and that this could be a bullish signal for the oil price. A strong rally in Brent has since continued and the price now stands close to $64 / bbl while the spread remains at $6.50 (Figure 3).
The main reason for this sustained recovery is that the oil market has been brought back into balance thanks to a high level of compliance in the OPEC-Russia+others production cuts and continued growth in global demand for oil. There are several other factors discussed below which suggest that the oil price rally may continue.
I know that there is always instability in the middle east, but I suspect the current situation wrt the arrests and regime instability in Saudi and the Saudi/Yemen/Iran saber rattling might have something to do with it.
Thank you Euan Mearns; Cheers
So the oil price seems to average $77 CDN per barrel. Why does Alberta have an $11 billion deficit? Ralph Klein paid off the deficit with oil less than half that.
The world is awash in oil. It’s everywhere.
The supply outstrips the demand. So why is it going back to $80 or $100/bbl and $2/l? Manipulation. The market is artificial.
Good news for Venezuela !? Will Socialism be kewl again … in time for the Socialist Democrat Party’s presidential run in 2020 ?
Captcha: TORINO Suth … now get off my lawn!
I hope Euan is right but there is still way to much oil around and the last 20 year driver of production and prices that was China’s industrialisation is over there is unlikely to be anything to compare to that. Prior to that the drivers for E&P was Regans policy for breaking of communism and prior to that the formation of the OPEC cartel.
So I maybe wrong but its back to maintenance levels of demand with unfortunately production and expectation geared far higher.
Smart people will load up on Alberta-based oil companies until Dec-20-2017.
This is as horrifying as it is puzzling. The price of oil usually follows the price of gold, which has been pretty stable of late.
100% correct.
Supply and demand. Cutting back supply is not manipulation, it’s business.