Oil price heads lower again

The oil price has fallen once more after America increased its supply of crude.

The recent rally in oil prices has run out of steam. Brent crude has slid from over $60 a barrel back to under $54 in the past fortnight; WTI, the US benchmark, has hit a new six-year low under $43.

Supply increases in the US and signs that oil producers' cartel Opec remains reluctant to cut production to bolster prices were behind the latest move.

What the commentators said

So although the rig count has fallen, "increased productivity at the remaining ones more than makes up the difference". The rally in prices has been a tailwind, noted Liam Denning in The Wall Street Journal. Explorers have been able to hedge future production at higher prices, and sell shares to ease the strain on balance sheets.

The upshot is that the oil traders who have marked prices up in the past few weeks have jumped the gun. American production may not ease until later this year, and ample stockpiles should cushion any short-term supply squeezes.

It will also take several months for the increase in global demand, a result of the price declines since last summer, to filter through, noted The Economist. Don't expect a sustainable rebound in oil prices for some time.

Recommended

Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021
More upside to come for the oil price
Oil

More upside to come for the oil price

The Brent crude oil price its highest level since last February this week. And there could be more gains to come.
14 Jan 2021
The price of this commodity has almost doubled since the start of the year
Gas

The price of this commodity has almost doubled since the start of the year

Liquefied natural gas (LNG) is fetching record prices in Asia, almost doubling in the last two weeks alone. John Stepek explains why this is so import…
12 Jan 2021
How rising oil prices could prick the US stockmarket bubble
Oil

How rising oil prices could prick the US stockmarket bubble

Even with the coronavirus resurgent and much of the world going back into lockdown, the oil price is rising. That could deal a serious blow to the US …
8 Jan 2021

Most Popular

Bitcoin does consume a lot of energy – but here’s why it’s worth it
Bitcoin

Bitcoin does consume a lot of energy – but here’s why it’s worth it

Some people question bitcoin’s legitimacy because it uses huge amounts of electricity to maintain its network. But that’s not a failing, says Dominic …
27 Jan 2021
Joe Biden’s spending spree will lift American spirits and markets – but it comes with a sting in the tail
US stockmarkets

Joe Biden’s spending spree will lift American spirits and markets – but it comes with a sting in the tail

New US president Joe Biden is planning to throw trillions of dollars in stimulus at his country’s economy. Markets will love that. But it comes with a…
25 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021