I am surprised by the strength of oil prices. As I type this post, West Texas Intermediate is flirting with $50, skirting a few pennies above or below.
Of course, the recent turmoil Africa, especially Nigeria, and the wildfires in northern Alberta have hampered oil supply. With forest fire no longer a serious threat to Fort McMurray or oilsands production facilities, companies are in the process of restarting their production, so this shortfall shouldn’t last much longer.
The next shoe to drop might be Venezuela. As we know, the country is experiencing severe difficulties, and that’s putting it mildly. Many are wondering if the country will completely collapse, and, if so, what that development might mean to its production.
OPEC has its next meeting this week on June 2. Given the rivalry between Iran and Saudi Arabia, I don’t expect any changes in OPEC’s position.
I am waiting and watching to see how some developments play themselves out. Does Nigeria continue to get worse? How long until Alberta production resumes normal levels? Will Venezuela be the next crisis? Does OPEC do anything unexpected? And how does the oil industry react to these higher price levels? Wrapping up, there’s just more continued uncertainty.