Examining the recent trend in crude oil prices

Abstract

Oil as a commodity has fascinated millions over the years, while catching the right moves have made a few billions like Jim Rogers (also called the Indiana Jones of the commodities market), it has also caused quite a few funds to shut down too. People have tried predicting prices using a bunch of different variables - some funds have even built complex weather predicting algorithms to get closer to the predicted value. Yet, the biggest moves by far have been geo-political. Ever since, oil was discovered in the Middle East in 1938, it has eclipsed ‘hajj tourism’ as the biggest revenue generator for most of the states. This paper attempts to analyse the recent trend in crude prices and also, attempt to talk about most of the events and variables which have off late affected crude prices namely positioning build ups and draw downs, withdrawal from the JCPOA, OPEC increasing supply, OPEC reducing supply, rising US shale production, rising Russian production etc. The rise of US shale production has given an upper limit almost to crude prices, while OPEC curtailing supplies has almost put a floor to the same. According to Jeff Currie, the head of commodities research at Goldman Sachs, this points towards a new oil order. Since, this paper seeks to comment on trends, detailed statistical analysis has been foregone for the sake of maintaining allegiance to simple correlations observed on charts by most traders, with this a bridge is sought to be built between trading research and academic research.