The oil price is at the top of a slippery slope

The big story in the markets this year has been the sharp jump in the oil price. The story of 2019 could be how it came back to earth with a bump.

Andrew Van Sickle
By Andrew Van Sickle
published

"The big story" in the markets this year has been the sharp jump in oil prices, says The Observer. Brent crude futures jumped to a new four-year high of $80 a barrel last week as new US sanctions on Iran and Venezuela, which would reduce supply further, appeared imminent. But if prices keep going up, "the big story of 2019 is going to be how oil came down to earth with a bump".

"One of the bull case's green lights that may soon start flashing amber is, now, demand," says the Financial Times. High prices always begin to temper the world's appetite for oil at some stage, thus ultimately begetting lower prices. That stage is now upon us. US petrol prices have jumped by about a fifth this year to $2.90 a gallon.

Consumers in emerging markets will also feel squeezed. Many developing countries cut or abolished fuel subsidies during the oil-price slump three years ago. "These centres of consumption growth [are] likely to feel higher oil prices more keenly this time."

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"With Trump in the White House, anything could happen," says The Observer. But provided we avoid a "geopolitical shock", oil supplies should gradually rise as US shale drillers boost output, while members of oil-cartel Opec will be unable to resist the temptation to exceed production quotas to make up for any Iranian shortfall and bolster revenues. Sooner or later, oil prices will subside.

Andrew Van Sickle
Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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