With oil seemingly stuck in the $51 to $54 dollar barrel range, an unusual uncertainty over oil’s direction appears to explain the price flatline. The neutral stance of crude’s non-movement isn’t without precedent but the last time we saw an extended period of non-movement of the hydrocarbon was back fourteen years ago in 2003.
While analysts and insiders toil with two outcomes; optimists seeing oil at $60/bbl and pessimists saying its collapse to $30 is likely, neither camp seems to be winning out. Between bears and bulls, realists suggest crude’s lackluster performance is something we should become accustomed to. For them, the global oversupply of crude accumulated over two years won’t be drawn down anytime soon, despite evidence that most OPEC and non-OPEC nations who agreed to production cuts starting January 1, are in fact moving in that direction. Indeed, countries that are not bound by production cuts are steadily increasing output while the demand picture, or world consumption, appears caught in a tug of war between growing energy efficiency and tepid economic projections. Under this granular and opaque landscape, the value of oil is no longer the valued hedge it once was. The ever advancing and evolving technology used by U.S frackers to produce more barrels for less stands as one of the major barriers to a hike in crude prices.
Moreover, the agreement to mop up the world’s oil glut that has accumulated for the last 2 or more years won’t be soaked up by a six month commitment to reduce oil output. Once the agreement ends in June, unless there’s a move to extend the cut back on crude oil production, oil’s price could come under severe pressure knocking it down into the $40 range or lower.
For us here at GasBuddy, the ongoing saga of guessing oil prices isn’t as relevant as what all this will cost you at the pump. Despite oil’s hibernation, gasoline prices never sleep. Download the GasBuddy app to stay ahead of gas price volatility.