The Real Effects of ISIS on the Oil Markets

by | published November 17th, 2015

Call it a patriotic rally, a statement of resolve, poking a finger in the eye of ISIS, or simply a market responding to a threat, but yesterday’s advance said something about how investors viewed the impact of events in Paris.

Terror will not dictate Western markets.

Not too long ago, the horrific events of last Friday would have caused an immediate (and appreciable) spike in crude prices. Traditionally, destabilizing or threat-inducing actions on the international stage have increased the uncertainty factor, fueled volatility, and prompted a move to cover shorts.

Not now.

True, yesterday posted a 2.5% increase in crude prices for both West Texas Intermediate (WTI, the oil benchmark traded in New York) and Dated Brent (the equivalent and more widely used global benchmark set in London). But this morning, both grades of oil were moving down.

Whatever happened to the geopolitical factor in pricing?

There are really only two effects ISIS will have on the oil industry…

Why Oil Production Is Increasing, Despite the Oil Glut

by | published November 12th, 2015

We have just come out of a period in which crude posted a modest recovery. Through close on November 3, West Texas Intermediate (WTI) – the crude benchmark traded in New York – had improved to $47.90 a barrel, up 4.3% for the week. Dated Brent, the equivalent benchmark set in London, was at $50.52 – higher than at any point since October 9.

WTI closed at $42.93 yesterday, down 1.4% in the six intervening sessions. Meanwhile, Brent was at $45.83, down 9.3%. Both are sitting at two-month lows.

The “culprit” was another anticipated rise in production, primarily in the U.S. Despite weekly declines in the number of working rigs in the American market (now at the lowest levels in some six years) and, as I noted in the last Oil & Energy Investor, rising cuts in capital commitments for new projects, the market surplus in oil is once again rising.

Crude oil prices are languishing in the face of what is projected to be another build in U.S. production stockpiles.

Given all that has been said about an oil glut, why is the production continuing?