The oil market has just become less predictable. This is what it means for your business
Global oil prices rocketed last week. Here's how to make the most of it.
Global oil prices rocketed last week following the United Arab Emirates’ energy minister’s suggestion that the Organisation of the Petroleum Exporting Countries (OPEC) may consider a coordinated cut to oil production. Reports on the actual price increase vary, with Reuters suggesting that U.S. prices rose by as much as 12% on Friday, following a 12-year low of $26.05 per barrel just the previous day. Brent was also recorded as up 4.9% early Friday morning, hitting $33.36 per barrel, compared to the sub-$30 price the day before.
Professional opinions differ on where the oil market is likely to head over the coming months and years. Hans van Cleef, senior energy economist at ABN AMRO, has stated the UAE minister’s announcement has caused the price increase, but that “we’re still in a long-term downturn.” Germany’s Commerzbank, however, suggest that we should expect “declining U.S. oil production…to drive the oil price back up to $50 per barrel by the end of the year.”
While the numbers themselves are certainly important, the vital take-away from this development is the changing trend in the oil market. Until last Friday, oil prices had seen a consistent decline, with prices falling some 75% from mid-2014 levels. It appears that we are faced with a market that is no longer predictably unidirectional; a volatile market means it is reasonable to expect more price rises in future.
So what does this mean for you? Our advice to consumers on purchasing their energy over the past year or two has typically been to wait as long as possible to buy – a fairly sensible decision when market prices are consistently falling. Given recent events, however, we can only suggest that you are more wary of the market from now on. It may no longer be prudent to wait for a lower price, as the market could just as easily spike again, as we have seen in the last week, costing you more money in the long run.
As always, Utilitas are on-hand for any and all of your procurement needs. Our expert advice and market insight allow us to make sure you buy at the right time, and at the right price.