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Geopolitics, Media, Market Forces: What's Really Driving Oil Prices?

By Ellen R. Wald, Ph.D.CommoditiesApr 11, 2018 05:30AM ET
www.investing.com/analysis/geopolitics-media-market-forces-whats-really-driving-oil-prices-200304568
Geopolitics, Media, Market Forces: What's Really Driving Oil Prices?
By Ellen R. Wald, Ph.D.   |  Apr 11, 2018 05:30AM ET
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Oil Daily
Oil Daily

Oil prices reached new highs on Tuesday as the market reacted to a combination of geopolitical, media and market forces. WTI hit $65.60, a gain of 3.38%, while Brent closed up 3.38% at nearly $71. Some declines should be expected as it becomes evident to the market that only one of these factors truly impacts global oil supply.

1. Syria Conflict

Syria, which is currently embroiled in a years long civil war, does not produce much oil, nor do any significant oil and gas pipelines run through the country. However, news of a potential U.S. strike against the Assad regime in retaliation for its recent alleged chemical attack clearly pushed oil prices higher on Tuesday. The fear is that a response by the U.S. and its allies would escalate the situation, which has pushed oil prices up.

A multinational bombing campaign in response to the alleged chemical weapon attack could take place in the next 72 hours. Oil prices could remain elevated in anticipation of such a campaign. Markets could also see a spike in oil futures if the U.S. and allies do bomb Syria. However, the conflict in Syria doesn't actually impact global oil supplies so any gains will likely be reversed in short order.

2. Bloomberg Report

Oil prices also rose in response to a Bloomberg article which reported that Saudi Arabia is seeking oil prices of $80 per barrel. The headline read “Saudi Arabia Signals Ambition for $80 Oil Price,” but the article itself made it clear that the Saudis have not actually targeted $80 as their preferred price.

The $80 figure appears to be a feeling that “people who have spoken to [Saudi officials]” arrived at based on “conversations” with Saudi officials. Regardless of whether Saudi oil minister Khalid al Falih is actually targeting the $80 per barrel price point, the article and its headline helped push oil prices closer to that goal. However, Saudi Arabia’s words and actions at the next OPEC monitoring committee meeting, to be held April 20, are what really matter. The monitoring committee is expected to make a recommendation about the future of the OPEC—non-OPEC production cut agreement.

3. Saudi Production

The Saudi oil ministry announced that it plans to keep its oil exports consistent at just under 7 million bpd in the month of May. Saudi Arabia produces more oil than that, but has been slowly funneling more of its own crude into domestic refineries and petrochemical plants for export as refined products.

This helps Saudi Arabia maintain revenue while simultaneously supporting higher crude oil prices. Of all three issues, this is the only one that will actually impact the supply of oil on the market in coming weeks.

Geopolitics, Media, Market Forces: What's Really Driving Oil Prices?
 
Geopolitics, Media, Market Forces: What's Really Driving Oil Prices?

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Kim Boesgaard Lauritsen
Kim Boesgaard Lauritsen Apr 12, 2018 2:45AM ET
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Good morning Ellen. Yes i think they will rise to. Thank you very much for this, i will off course share this in my network, and i hope that you will have a lovely day. All the best from me to you. :-)
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ECL SALES
ECL SALES Apr 11, 2018 7:08AM ET
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Any Military Action throughout history has been bullish for Oil. Since it disrupts the Oil Markets overall and enhances uncertainty towards its future transportation.
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Xoana Flores
Xoana Flores Apr 11, 2018 7:08AM ET
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bearish since 30 usd WTI. the one who followed this journalist is bankrupt
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