Our Blog

Monitoring Oil Prices

Many oil and gas interest owners rely on the operator to sell their share of production for the best price available. However, since the volume produced, and realized price, are the main determinants of revenue, it is always a good ideMany oil and gas interest owners rely on the operator to sell their share of production for the best price available. However,since the volume produced, a to have a basic understanding of prices and what affects them.  A recent article in “Oil Voice” offers advice as to how to get started monitoring oil prices.  Note that the article deals primarily with the supply side and not demand related factors.

Oil, like most commodities is constantly being traded, and the price is constantly changing. Also, there are many prices depending on the type of crude, its location, etc.  However, there are three major benchmark crudes, Brent, West Texas Intermediate (WTI), and Dubai.  Here in the U. S. we are primarily concerned with the first two.

Global production levels, natural events, and local political developments are among the many factors affecting prices. When production falls off in major producing countries, it can cause prices to rise.  Of course, if other nations make up the shortfall, that is not likely to happen.

Natural events, such as hurricanes, can cause offshore production to be shut in. Also, fires in Western Canada shut down oil sands projects there.

Political upheaval (the war in Iraq, strife in Libya, unrest in Nigeria, and turmoil in Venezuela) have all restricted production from time to time and caused prices to spike temporarily. Cartel arrangements, such as OPEC, and production cutback agreements can also increase, or at least stabilize, prices.

New major discoveries can also have an effect in the long run as they can increase supply and exert downward pressure on prices.

Given the highly integrated nature of crude oil markets, monitoring prices means monitoring world events. The article advises, “News of political, environmental or indeed economic nature should be read daily.  Read it whilst getting alerts on any spikes or drops and you should be in a good place to make an informed decision on guessing the direction of oil prices. (Please note that the italics are mine, not the author’s, as I want to emphasize that guessing is far from accurately predicting, much less knowing).

To read the article in its entirety, please go to https://oilvoice.com/Press/4889/Why-Oil-Prices-Change-and-How-to-Monitor-Them?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+OilVoicePressReleases+%28OilVoice+Press+Releases%29 .

Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide.  Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.

June 20, 2017 | Oil and Gas, Pricing