KEY POINTS
- Oil prices steadied after seven consecutive weeks of decline.
- Global supply and demand dynamics, as well as geopolitical tensions, are influencing prices.
- Analysts predict short-term price volatility amid market uncertainty.
Crude oil prices have now become somewhat more stable after a seven week decline that has been attributed to both global supply and demand factors as well as political instability. Following the volatile supply and demand factors that have characterized the market in the past weeks, crude prices for Brent and WTI stabilized as investors considered future trends.
Market forces affecting prices of oil in the global market
The most recent oil price decline has been informed by fears of a decline in demand, especially in the largest markets including China and Europe where the rate of economic growth has slowed down implying less energy use. Also, supply increase pressure as recently witnessed by increased in oil production of the United States has put pressure on the prices.
However, the stabilization of prices this week indicates that market forces could be coming to bear. Some of the reasons given by analysts for the recent price correction include; increasing geopolitical risks and the likelihood of production cut by some of the world’s largest oil producers.
Reuters reported that Brent crude was trading flat at $91.40 per barrel and the U.S. WTI crude at about $87.35 per barrel. This stabilization comes after a seven-week decline that has caused some uneasiness about the future of global energy markets.
Political risk makes the market more unpredictable
Besides factors relating to demand and supply, increase in global tensions in oil exporting countries has also affected the prices of oil. Instability in supply sources has been occasioned by conflicts in the Middle East and North Africa and sanctions on some of the largest oil exporting countries. This has made some investors to place their bets on a possibility of a rise in prices especially if supply shocks happen.
These tensions, however, are unpredictable and analysts have warned that the market could remain volatile in the next few weeks.
Some short term fluctuations expected
However, the market experts are predicting short term fluctuations in the prices of oil as the global economic and geopolitics changes. The fluctuations in key markets, production and potential policy changes by major producing countries will also remain determinants to future prices.
While some analysts are of the opinion that the worse might already be over, others are still cautioning that any change in the global demand or supply shocks could easily cause the prices to start swinging again. For now, the oil markets are still volatile and there are forces that push the prices up and others that pull them down
