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As I write this (Tuesday, April 10), oil prices are billowing higher.
Both West Texas Intermediate (WTI) and Brent are rising sharply, each up 1.9% for the day before the market even opened.
That means WTI has jumped 4.1% in less than two trading sessions, while Brent has improved by 4.3% over the same brief period.
Now, I do expect that there will be some leveling off as the rise catches some resistance.
However, we cannot underplay what's been happening in oil recently.
With WTI approaching $65 a barrel and Brent already surpassing $70, both have surpassed my estimate of where the prices would be at the end of June.
And this is why…
What Happened?
The one reason garnering the most press for oil's recent volatility is China.
The oil market is seeing a relief rally after U.S. officials backpedaled on a potential trade war with the "Red Dragon" over the weekend.
Yet, that remains largely speculative, as (no pun intended) analysts attempt to read tea leaves in search of substance.
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And then there is always the ever-present possibility of a tweet from the White House undoing everything.
The second reason being the markets gave back most of a huge gain late yesterday afternoon as news spread of a subpoena-fueled office and residential search of the president's personal attorney, Michael Cohen.
Based on what is happening this morning, much of that lost advance is likely to be reclaimed today.
Third, adding to the upward trajectory is a spree of geopolitical mayhem developing across the globe.
We've got a deteriorating environment in the Persian Gulf, a continuing collapse in Venezuelan oil production, and persistent uncertainty in Libya and Nigeria.
And then there is the ongoing weakness in the dollar, adding to the push-up.
Notice what all of these have in common…
With the possible exception of forex considerations, and even then discounted by the mere fact that the value of the dollar has an impact on oil prices almost entirely in international sales, these elements have nothing intrinsically to do with oil itself.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.
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