You can ignore about 95% of the headlines that try to explain the daily increases or decreases in the price of oil. Nothing fundamentally changed today except the U.S. dollar index went up slightly. A strong dollar does put pressure on oil prices.
Like stocks, the price of oil moves up when there are more buyers than sellers and it moves down when there are more sellers than buyers.
If Iran invades Saudi Arabia, that's a real reason for a spike in oil prices. If peace breaks out in Libya or Venezuela wins the lottery and uses it to get a new government, those are reasons for a significant decline in the price of oil.
Fundamentals are heading in the right direction: During the 2nd quarter we should see an increasing drawdown in both crude oil and refined product inventories. During February & March liquid inventories declined by ~75 million barrels. We should see a decline of more than 100 million barrels in crude oil inventories in Q2.
Recipe for higher oil prices:
1. Increased demand
2. OPEC, Russia and other NOCs cut production
3. Production growth in the U.S. is at a reasonable pace
Oil Prices
Oil Prices
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group