A Volatile Week In Oil As Security-Driven Supply Concerns Counter Demand Concerns - The Stock Market News (2024)

FAQs

Is crude oil volatile? ›

Crude oil is a mixture of comparatively volatile liquid hydrocarbons (compounds composed mainly of hydrogen and carbon), though it also contains some nitrogen, sulfur, and oxygen.

Several major oil price shocks have occurred at the same time as supply disruptions triggered by political events, most notably the Arab Oil Embargo in 1973-74, the Iranian revolution and Iran-Iraq war in the late 1970s and early 1980s, and Persian Gulf War in 1990.

Crude oil prices can change due to a number of factors but primarily from the perceived changes in supply and demand that comes from both overall output worldwide and the economic health of the industry's major consuming countries. Options on crude oil and micro WTI crude oil futures are also available.

Like any product, the laws of supply and demand influence prices. Natural disasters that could potentially disrupt production, and political unrest in oil-producing countries all impact pricing. Production costs influence prices, along with storage capacity.

An essential oil is a concentrated hydrophobic liquid containing volatile (easily evaporated at normal temperatures) chemical compounds from plants. Essential oils are also known as volatile oils, ethereal oils, aetheroleum, or simply as the oil of the plant from which they were extracted, such as oil of clove.

When crude oil prices rise, naturally, input costs and overall production costs also rise. This causes profit margins to fall, which in turn reduces the stock price of that company. Conversely, a fall in oil prices produces the opposite effect.

The reason for volatile prices, inflexible supply and demand

Both the supply of crude oil and demand for petroleum products like gasoline, diesel and jet fuel, are relatively inelastic, meaning that a relatively large change in price leads to a relatively small change in supply and demand, especially in the short term.

One sector of the stock market is strongly correlated with the spot price of oil: transportation. This makes sense because the dominant input cost for transportation firms is fuel. 6 Investors might want to consider shorting the stocks of corporate transportation companies when oil prices are high.

World Oil Reserves

The world has proven reserves equivalent to 46.6 times its annual consumption levels. This means it has about 47 years of oil left (at current consumption levels and excluding unproven reserves).

Why are oil prices suddenly so high? ›

The increase this year, prompted by geopolitical worries and supply constraints, has sent gasoline prices higher and could hamper efforts to tame inflation. Oil prices have climbed in recent weeks, spurred by concerns over supplies and geopolitical risks, including wars in Ukraine and the Middle East.

Today's live Brent crude oil spot price is at $89.16 per barrel. That's up 2.04% from last week's price of $87.38 per barrel.

Like most commodities, the fundamental driver of oil's price is supply and demand in the market. The cost of extracting and producing oil is also an important factor. Oil markets are composed of speculators who are betting on price moves, and hedgers who are limiting risk in the production or consumption of oil.

OPEC is a group that includes some of the world's most oil-rich countries. OPEC members at the beginning of 2021 held about 72% of the world's total proved crude oil reserves, and in 2022, accounted for about 38% of total world crude oil production.

A survey of 46 economists and analysts forecast that Brent crude would average $82.33 a barrel in 2024, up from the $81.13 consensus projection in February.

However, this is far from the truth. Crude Oil extracted from the ground in its natural unrefined state varies considerably in its density and consistency, from a very thin and volatile liquid to an extremely thick, semi-solid heavy weight oil.

Fuel oils have a moderately broad range of volatility and solubility; thus, fuel oils nos. 1 and 2 are moderately soluble and volatile, while fuel oils nos. 4, 5, and 6 are not very soluble. All diesel oils are considered types of fuel oils.

“Price volatility” refers to the degree to which prices rise or fall over a period of time. In an efficient market, prices reflect known existing and anticipated future circ*mstances of supply and demand and factors that could affect them.

Volatile Organic Compounds (VOC) are light components of crude oil, which evaporate during loading operations or during the carriage of high-volatility crude oil cargoes. The cargo vapour needs to be vented to the atmosphere to prevent pressures in the tank reaching dangerous levels.