Every few days, I now realise I need to check what the price of a barrel of Brent crude oil might be. This is this morning's six-month chart from the Financial Times.
Take a 5-year view, and this is what you get:
So what is happening here?
The current oil price is around $93 per barrel, which, as the chart shows, represents a marked decline from the peak seen in recent weeks. Yet again, it would seem that oil traders believe what Donald Trump has said. They seem to think that because he hinted that a deal on the Strait of Hormuz might now be available, everything will return to normal very soon.
Of course, as this chart reveals, they have thought this before. They did so in mid-April. They did so again in early May. Now they are repeating their folly, which is very hard to understand. The reality is that there is no agreement between the USA, Israel and Iran as yet, and the prospects of one appear to be highly unlikely.
Attacks from both sides in the Gulf took place last night.
Israel is continuing its offensive in Lebanon and says it has no intention of pulling back or declaring a ceasefire and withdrawing. It doin so is part of Iran's conditions.
Meanwhile, there are no agreements on sanctions and the unfreezing of assets, uranium and its destruction, or the unblocking of the Strait of Hormuz.
Nor, given the requirement that Israel agree to a deal, is Donald Trump in charge of any outcome, meaning that whatever he has to say is of little immediate consequence.
What is more, if an agreement is reached, there are years of repair work to be carried out before oil and gas can flow properly again, and, given the current state of the supply chain, market disruption will last for many more months, if not longer. Massively depleted oil stocks would also need to be replenished, and that in itself is going to cause continuing upward price pressure.
I have said it before, and I will no doubt say it again, but these supposedly rational market players are demonstrating they are anything but that. I have no desire for high oil prices, except to encourage the use of alternative energy sources, but to think that markets are now heading for a more stable state when all the evidence suggests to the contrary is absurd.
That is especially so when Trump is in a war in which he is completely out of his depth, meaning that things are very likely to get very much worse before they can get better, suggesting that today's oil price appears profoundly unsustainable.
This is not our consequence. Most worryingly, it. provides our cowardly politicians with an opportunity to continue their pretence that there is nothing that they need to do about this developing crisis, when the exact opposite is true, and they will fail us as a result.
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I wonder if some traders and I am sure that there are a few who understand the situation who have looked into the void are so horrified that they have closed their minds to it
Surely ‘trades’ mean profits? fast reactions getting an edge before the rest? the more volatility the better chance of a ‘win’? reminds me of tennis… the only trading floors I have visited stink of sweat and testisterone.
Thank you very much, NOT, for calling me stupid Richard. I’ve just ordered at $93 for delivery at the end of this month. I represent a client on the buy side of a trade, I’m a trader in other words.
If you’re going to call me stupid, then I’ll call you a daft banana.
I think you prove my point
Stupid and uncouth to boot.
Why feed the troll, Richard?
Anyway, the volatility in the oil price certainly is played by the Trump organisation in a classical “pump and dump” move, using the anonymity of cryptocurrency, solely for personal gain. People die as a result? As long as they aren’t white Republican Americans, it doesn’t matter.
Bananas are even more risky than Brent crude, Maxwell – all the same species, could disappear in a flash from disease or climate change, nil genetic resilience AND a lot have to go through Hormuz, daft or otherwise.
Good luck on price and availability with your one month Brent crude deal – I hope you priced in some overland camel transport.
Personally, I’m fed up with my energy prices being distorted by traders, and Middle East wars being caused ultimately by imperialist inspired energy theft, speculation, profit gouging, war crimes and corruption, ever since oil was first drilled in the ME.
Might they be obsessively greedy?
Just wondering. If 20% of the world’s oil etc production is cut off plus the release of fuel from reserves has resulted in seriously depleted reserve holdings, isn’t there a supply problem looming for future oil contracts?
Yes.
Delievery will be the issue.
Then the panic spreads.
Thee traders never go near the reeal stuff, after all
Nor do – for that matter – economists.
Found this article quite interesting, maybe on topic: https://www.artberman.com/blog/the-price-isnt-right-fundamentals-dont-support-100-oil/
That is about gameplay, not value
The second FT chart is interesting. Deal on, price declines, deal off price rises, deal on, price declines, deal off etc.
Who knew what, when?
It goes without saying that tRump lost his marbles some time ago. Those that surround him may well have discovered a “nice little earner” (who knows, may be they give a bung to Net&yahoo t0 keep this show on the road – he is certainly one of the players and faces a corruption trial if & when). Plenty of tRump-supporters amongst the oil mob & traders. Volatility is how you make money on markets (& a bit of inside knowledge goes a long way).
So, Exxon Mobile and Chevron are forecasting $160 a barrel: it may go higher. Oil industry experts are describing this as an unprecedented disaster on a scale never seen before and far, far worse than 1973. And what are our government doing to prepare for this?
I suggest folk watch this YouTube video: https://youtu.be/FwKXe7Oel7E?si=tICgW7-0GTWopMnG
Many years ago, when I was working in the pulp and paper industry, a very rich and successful trader told me he made much more money when prices were volatile than when they were stable. I assume it’s the same today and that what applies in one global commodity market is good for them all?
You are right
Exactly. In today’s financialised world, dominated by trading and speculation, instability is what they want as that’s when they make the big bucks.
Instability is exactly what most people – and most real businesses – do not want.
If this is trading in today’s markets, I’d call it gambling, no more, no less.
Nobody knows which way oil prices will move in any given time period. Except, traders might have a hunch, or even informed fancy and make a bet on the strength of it. That’s gambling.
This week, thousands of punters will pore over the Ascot racecards in their papers and have a bet on the horses. That’s also gambling. The stakes on the horses are probably much smaller, but apart from that, I don’t see a lot of difference between the two forms of gambling.
Smart-arsed ‘traders’ like Maxwell on an earlier post wouldn’t like to be called gamblers, but that’s exactly what they are.
They are betting on the behaviour of other traders, not on the availability of oil. The activities of the market become the reality, and the physical world becomes background noise. And the oil market isn’t the only one. It’s one of the reasons we’re in such a mess.
That’s exactly right!
Let’s be honest, the whole of financial markets, insurance, pension pot investments etc is a massive gambling scam.
@Alan – I’ve no problem with you calling me a gambler. There’s a lot of risk in sea freight but delivery is expected in Port of Los Angeles by the end of the month. Will American auto drivers pay the higher price when it makes it to the pumps. Will there be some profit for the participants in the overall system. As a I said , no problem with being called a gambler by yourself.
It’s being told that I’m stupid and the counterparty to the trade is stupid that I object to. The price was mutually agreed. Maybe you can only be not stupid in this world when government sets the price with a certain eminence in these parts being on the committee.
You did no such trade
I just mailed you
You do not work for who you claim
You are not a trader
You are a troll – and very small mindeed
We must remember that traders are mostly salaried employees who are told what to do. The few that I have known are/were highly intelligent young people who do the job for a few years before moving on.
The problem is caused by the “system” which encourages short-termism rather than investment. It would help if the use of bonuses to incentivize performance and high-frequency automatic trading were banned.
They are on massive bonuses and have considerable freedom to trade at their own discretion in most banks.
So to what extent should an individual who enjoys the excitement of the trading world, has good intuition and achieves significant satisfaction from generating a good profit for both themselves and their employer be free to flourish as an individual within that environment?
Is there any degree of purely speculative investment that is acceptable and, if so, should it be covered by the same regulations that control and tax other forms of gambling?
If speculation involves limited stakes, non-borrowed money, totally open data, no externality and no form of abuse it can be tolerated.
A tiny proportion would be left in that case.