Five potential risks to the oil rally - WSJ
|The Wall Street Journal (WSJ) is out with an opinion piece, highlighting the five potential risks that could hamper the ongoing oil rally.
Key Five Risks:
1. Geopolitics
While tensions in the Middle East has led to possible disruptions in oil supply (which is one of the supportive factors in the current rally), these geopolitical tensions will eventually subside - and oil prices could lose their immediate support.
2. Crude demand
Oil markets are heavily dependent on demand and supply talks but I don't see global demand waning that much, not when a global growth is moving forward in such synchronized fashion.
3. OPEC discipline
This is one of the bigger factors that could influence prices. The issue here is compliance - especially in times when prices are rising. It wouldn't be surprising to see some producers "cut" corners and increase output to take advantage of the higher prices.
4. US drillers
One of (if not the biggest) the contributors to the downfall in oil prices in recent years. Higher prices will give more incentive for US shale producers to pump harder.
5. Market speculators
OPEC's argument has always been "when prices rise, it's due to fundamentals" and "when prices fall, it's due to speculation". Well, whether or not they want to believe in it, bullish bets on oil has risen considerably in the second half of last year and has even surpassed that of the start of 2017 - according to data from ICE. So, the rally may have just gone too far, too fast and a retracement/correction here is very much a possibility.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.