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Even with so many variables affecting oil prices, still, we have the power of the market.
6 Facts About Oil Markets
1. The supply side helps to explain the price of oil.
When shipments are down, price goes up:
2. Then, looking ahead at supply, we have the NACHO trade.
Oil markets are up because of the NACHO trade–Not A Chance Hormuz Opens:
Yes, producing countries are building alternative routes. But new pipelines, will be expensive and also could become targets.
3. Meanwhile,, China could create more demand.
China’s “buying pause,” might end. While China has decreased oil imports and used more of its own inventory, they could reverse policy because of lower July and August prices from Gulf producers like Saudi Arabia and concern with depleting their reserves.
4. In addition, crack spreads are growing.
A new term for me, the crack spread is the difference between refined products’ prices (like diesel) and crude oil:
Why care?
The crack spread matters because, reflecting the refiner’s elevated profit, it adds to what truckers and farmers pay. We can expect their elevated expenses to become our higher prices.
5. But still, markets need not reflect global upset.
During past disruptions, the price of crude inadequately reflected global events:
6. Currently, the crisis has enjoyed a cushion.
That cushion included China demanding less, sufficient inventories, and more production from the U.S., Guyana, Russia, and Venezuela:
Our Bottom Line: Supply and Demand
Our facts take us to the power of the market.
When supply decreases and demand goes up (or even remains the same) the price of crude will rise:
My sources and more: Always a handy source of facts and insight, the IMF blog recently focused on oil markets. Then, we discovered the perfect complements when Axios’s Emily Peck took a dive into diesel and WSJ dug into the impact of OPEC supply and China’s oil demand. Also from WSJ, we got more oil price insight.