Earlier this week, US light crude oil prices hit a high price of $70.50 per barrel. Crossing the $70 bar set US oil prices at a fourth-month high. The local high was sparked by falling US crude inventory and production levels. Despite the rise, oils prices fell again on Thursday. US light crude oil prices fell by more than a $1 down to $69.22 a barrel. Similarly, Brent crude oil dropped 70 cents a barrel to a price of $79.04 a barrel. Brent crude oil rose to a price of over $80 per barrel on Wednesday, this past week, due to the expectation that US sanctions against Iran’s oil exports will tighten global markets.
In large part, the increase in oil prices to get to the four-month high has been attributed to the ever-increasing demand for oil. According to the International Energy Agency, the global demand for oil will exceed 100 million barrels per day in the next few years. Despite that fact, there are many risks that have caused the downfall in prices. The monthly report from the International Energy Agency stated that “things are tightening up” and “As we move into 2019, a possible risk to our forecast lies in some key emerging economies, partly due to currency depreciation versus the U.S. dollar raising the cost of imported energy.” Beyond currency risks, the trade war between the United and States could affect oil prices in both the short term and the long term. US companies in China are being hurt by the tariffs.
In the short-term, experts suggest supply will be a problem. In the week of September 7th alone, US crude stocks fell 5.3 million barrels to 396.2 barrels. The total signifies a more than 1% drop in supply in just one week. Additionally, the 396.2 barrel levels indicate the smallest supply since February 2015 and 3% below the five-year average for this time of year. Both the Energy Information Administration and other economists predicted a drop in supply in the short-term, but, as cited by Stephen Innes, head of trading for Asia-Pacific at Oanda in Singapore, the inventory data showed “a much deeper drop than analyst’s expectations.”
At market close on Friday, US light crude oil prices ended at $68.99 a barrel while Brent Crude Oil ended at $78.09 a barrel.
