Monday was a good day for crude oil as the price of the commodity soared to touch the $50 per barrel mark. With fluctuations characterizing the price of late and its subdued showing in recent times, this was indeed good news for those invested in this commodity. However, the price dipped soon after the threshold was breached, indicating that too much should not be read into the price change.
First time since May 25th
To put things in perspective, it is important to know that this is the very first time since May 25th that the price of crude is breaching this price point. It is also significant to note that this upward price movement came after crude soared by 9% last week in a rally whose likes have not been seen in about a year.
Not very long ago, five weeks, to be precise, crude oil prices were showing the stress of bearish pressures coming down hard on them. An alarming low of $42.05 per barrel had been touched back, then making the current 16% upward swing even more dramatic now.
Supply fear ease, letting price move favorably
Fears about a supply glut had kept crude prices subdued over the past weeks and with this fear subsiding a bit, the prices have been allowed to move up. The worsening Venezuela crisis is another reason why the price of crude oil is on the move up. Venezuela has the maximum magnitude of oil reserves and any political instability here affects the crude markets quite drastically. This is what has happened now as well. The complicated political situation and the political clash around the assembly elections have created a situation of violence and unrest in this region, and this has led to fears that supply from this region will be adversely affected. In consequence, prices of crude have moved upwards.
Factors that may further impact crude prices
The expectation of sanctions being brought to bear against Venezuela by the U.S. adds another dimension to the pricing change predictions. It is also believed that a new ban on the sale of crude and refined products may be brought in. While an embargo does not seem likely for now, there is no question that any move by the U.S. will definitely leave a mark on crude prices that are already reacting to the many factors that are leading to price fluctuations.