The year 2018 had started very promisingly for the oil price, with the price climbing around 25% from January until June, when it started to give back some of the gains. The black good seems to be at the center of attention and most of the global superpowers want to expand their dominance in the industry. Because of that, the oil price might be affected and volatility could spike higher.
Major events briefly explained
The OPEC ministers meeting that ended on June 22 came with another increase of the daily supply. After a tense negotiation that took place for a week in Vienna, Austria, Saudi Arabia managed to convince a few reluctant producers like Iran, Iraq,and Venezuela to support the output hike. The move had been widely anticipated by the market and oil trading spiked after the news, with the price advancing higher.
The United States pulling out of the Iran deal is another important event that took place this year, after the US President Donald Trump decided to take this potentially dangerous decision. Despite opposition from the other powers that want to continue with the agreement, the United States is willing to impose sanctions on every country that wants to do business with Iran. If a deal between Iran and the United States won’t be reached, Iran will find itself unable to sell its oil. Thus far, a tough the exchange of words took place between Iran’s supreme leader and Donald Trump, showing that the disagreement between both parties had not been solved.
The United States wants to increase its dominance in the industry
By putting together all the pieces of the puzzle, it is very clear that the US wants to get more involved in the oil industry. The first sign proving that is the increase in the output in a period when the OPEC members were desperately cutting the supply in order to support a rise in the oil price. Latest numbers suggest that the US continues to increase supply.
The signs we see from the US presidents seem to aim at tempering the rise in prices. Donald Trump had directly asked through the press for Saudi Arabia to further increase the daily supply in order to stop the oil price advancing any further.
Thus far, that is happening, since oil is not set to close the month of August on the negative, after doing the same in July.
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