From a recent WSJ article (http://www.wsj.com/articles/crude-oil-prices-fall-as-hopes-for-production-cuts-fade-1471857989) here are some explanations of why oil prices have been moving around. First, the chart from barchart.com:
Why prices were up:
“Prices have risen for three straight weeks on optimism that the Organization of the Petroleum Exporting Countries could agree to freeze production at an informal meeting in September.”
Opec has had ample opportunity to freeze production over the past couple of years and failed to do so… What’s changed that a market would move by 20%? (And, why would financial news services define this move as a bull market in crude? Try telling an oil producer we’re in a bull market…)
Why prices were down:
“But many analysts are skeptical that a deal can be reached, or that an output freeze at already-high production levels would help reduce the oversupply of crude.”
It took three weeks to figure this out?
But this is my favorite throwaway line explaining oil price movement:
“The dollar rose Monday against other major currencies on increased expectations that the U.S. could raise interest rates this year. The WSJ Dollar Index recently traded up 0.1%. A stronger dollar can make oil, which is priced in dollars, more expensive for buyers using other currencies, reducing demand.”
Can it be that simple? Interest rates would likely rise only if economic activity continued to increase, which would increase demand for energy. Isn’t the reason why the dollar moved more important than the dollar movement itself?
I’m not sure which is harder, predicting future oil prices or explaining current ones…
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