The price of oil seems to be going nowhere fast.
During the last 12 months, benchmark– used in many international contracts – has budged by less than $2 a barrel between 12 March last year and today.
There has been a little more excitement regarding USbut not much. Here, the change between the end of the period and today is just over $4 a barrel.
Highs and lows within flat picture
Given that the 14-nation energy cartel, the Organisation of Petroleum Exporting Countries (OPEC), has a stable oil market as its objective, its leadership is presumably pleased by the fairly statistic performance of crude prices.
This morning, Brent was 0.42% higher at $66.86 a barrel, while WTI was 0.49% higher at $57.07.
One month ago, on 12 February, Brent stood at $62.42 a barrel while WTI changed hands at $53.10. Three months ago, on 12 December, Brent traded at $60.15 and WTI at $51.15.
Twelve months ago, on 12 March 2018, Brent was worth $64.95, while WTI sold for $61.36.
Two big factors driving the price of oil have been the likely success or otherwise of what are effectively back-to-back deals to support the oil price by curbing production, deals involving OPEC members and other producers, and the state of the world economy.
A previous agreement among OPEC and so-called NOPEC countries, non-members sympathetic to the cartel’s aims, expired at the end of last year. A new agreement was in place by the end of 2018 but did not take effect until January.
This gave sceptical traders space in which to go short on oil, which may well explain the 24 December trough.
Clouds over economic outlook
But as January progressed, the mood seemed to change.
Set to run for an initial six months, the deal will take 1.2 million barrels a day out of production. Although this amounts to just about 1.2% of total production, supply and demand is very closely balanced, at about 100 million barrels a day, so relatively small changes in supply can have a big effect on the price.
In total, 24 countries are involved in the agreement. OPEC includes Saudi Arabia and Iran, while the NOPEC group takes in Russia and Oman.
“The global economy is projected to grow at 3.5% in 2019 and 3.6% in 2020, 0.2 and 0.1 percentage point below last October’s projections.”
The undramatic performance of oil prices may seem to give little scope for traders, but in fact provide promising conditions for, in which price ranges are identified and traders identify patterns and ride the ups and downs.