Oil Market Becoming Too Volatile, Say Analysts

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Oil Market

As per analysts, the oil market is becoming increasingly unpredictable by the day. This is a drastic shift in dynamics since the crude oil prices started rallying after hitting a rock bottom owing to production glut.

For example, Brent crude, which is considered the international benchmark, has plunged almost 9% from the last week’s high of $79 a barrel. The dip is a result of the mounting evidence of Saudi Arabia, a major oil producer in the OPEC region, pumping higher amounts of crude. Other Middle Eastern oil producers are suspected of doing the same, apart from the U.S. and Russia. In fact, looming sanctions on Iran, has egged members of the OPEC to increase exports. All these are pressuring oil prices downwards.

Economic and Political Developments Majorly Impacting Market

Analysts note that economic and political events are impacting the oil market like never before. Supply and demand is getting more and more uncertain on account of the unfolding of such events. Saudi Arabia, for example, suddenly upped crude shipments to markets across nations worldwide by almost 4 lakh to 7.6 mn bpd last month.

The U.S. Energy Information Administration (EIA), on the other hand, revealed a few days back that crude output in America surpassed 11 million bpd for the very first time on the back of massive increase in drilling of shale. In addition, a sudden rise in oil inventories in the U.S., announced last week, has also added to the bearish sentiment prevailing in the energy market.

However, in spite of the bearish trend, oil prices are expected to firm in the near future with U.S. sanctions on Iran kicking in.

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