Oil Price Rally Helps Stock Markets Recover

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Stock markets around the world are floating up as the price of oil increases – but any gains are likely to be short-lived.

The price per barrel has slowly climbed to between $50 and $60 in recent days due to bad news from oil producing nations.

Three events that cut oil supplies

Three incidents have impacted on the markets –

  • Venezuela is embroiled in a political crisis as opposing political factions take to the streets after the government declared a state of emergency and called in the military to carry out ‘exercises’ in major cities.

The underlying problem is widespread crime and looting because of shortages. Looters have stolen anything and everything from basic foods to underwear. Rampant inflation has seen prices soar and wages no longer pay enough to live on.

Since the closure, Nigeria’s oil production has plunged by 40%.

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  • Canada has uncontrolled forest fires burning over a massive area around the shale oil city of Fort McMurray. Tens of thousands of people have fled the flames and the fires are expected to burn underground for a year or more.

The devastation has led to a shutdown of Alberta’s oil sand production north of the city.

Brake on oil production

Together, the three events have reduced global oil production by around 750,000 barrels a day.

Analysts claim this was something the OPEC leaders failed to do recently.

The result is a brake on oil production to reduce oversupply problems, which pushes up the price per barrel.

The result is a passing solution as each nation will step up production as soon as possible to prevent a loss of oil revenues.

OPEC is hoping producers outside the group will turn off the tap and help reduce oversupply sloshing around the oil markets.

The US is already slowing shale oil production by around 400,000 barrels a day, and the UK, China, Mexico and Kazakhstan are expected to slow output as well.

Effectively OPEC has gained an oil supply cut by a serious of unexpected incidents.

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