As WTI (West Texas Intermediate) broke above $66 dollars a barrel to touch $66.82 at the end of trading day last Wednesday, it managed in 3 trading days to pick itself off the mat when it fell to $62.06 after last week’s panic over the fallout of a potential trade war between the U.S. and China. No sooner was that forgotten and the threats of tariffs had vanished, that events in the Middle East began to rear its head after a nearly four-year hiatus.
Sure, weather-related factors saw oil and gasoline rise in the wake of last summer’s two near-overlapping Hurricanes (Harvey and Irma) which caused oil to climb a feeble $2 a barrel from $47 to $49, but they soon settled back to their under $50 threshold, once refineries affected in the Gulf Coast came back online. Little movement occurred until November when oil broke free from its $50 a barrel mooring and raced steadily to its $60 footing in the last days of 2017.
The move this past week isn’t just unique, in that oil is now trading at prices not seen since December 5, 2014, despite conventional wisdom and bearish builds in U.S. Oil, gasoline and diesel supplies, markets have seized on to geopolitical tensions to propel WTI towards the $70 goalpost; a sure sign that bullish bets and higher prices for traveling by air, train, sea, truck or car is about to be as expensive as anything seen since 2014.
Tensions in the Middle East over a possible military strike in Syria in response to that government’s use of chemical weapons on civilians in Douma and a surprise missile and drone attack by rebel Houthi’s in neighboring Yemen on Saudi Arabia’s capital, Riyadh, has many buying oil in light of perceived risks to OPEC as a stable supplier and an evolving confrontation with two of the world’s superpowers, the U.S. and Russia.
Interestingly, market watchers are rapidly coming to the conclusion that for the first time in the past couple of years, OPEC’s production cutbacks and growing American tight shale oil production is no longer the main driver of crude values. Political turbulence appears to be the new kid on the block and combined with the balance in global supply and demand for oil, geopolitics will now resume its role as the lead consideration in governing where oil prices go in the days ahead.
International news is back in vogue when it comes to how much you can expect to pay pretty much anywhere in the world.