Oil Shenanigans

Oil Shenanigans

May 28, 2018 admin Alternative Assets, Australian economy, Equity, Global economy, news, SMSF 0 Comment

In recent weeks, oil has had a stellar run. Back in 2016, the oil price collapsed, trading just under $30p/b. Last week it topped $80p/b, lifting around 6% in a month, or 160% from the 2016 lows.

Oil is dominated by OPEC which is mostly run by the Saudis, and Russia as the other major producer outside of OPEC. Iran is the 3rd largest OPEC producer and has been back in production this year after years of sanctions. However recent events have seen the Trump Administration scrap the 2015 Nuclear Accord with Tehran, as Iran is seen as an increasing threat to Israel. It’s all fairly convoluted, but these geo-political risks have seen oil prices spike this month.

On Friday, we received a reprieve in oil prices, as Russia and the Saudis agreed ~$80 as a cap. They have both been advocates for higher prices, however if prices get too high, other producers (such as the US shale) will come back into the market, meaning Russia & the Saudis will lose control again.

What this means, is there is a point where alternative producers or energy make more sense, or people simply stop consuming oil. This level appears to be $80.

 Oil price history

Oil prices have pulled back on the news to around $76, and this may retreat slightly further to a more sustainable $60-$70 range (Assuming no local wars).

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