Talk of oil price surges are everywhere: newspapers, television news networks, and even among the patrons at your favorite local coffee shop.
But, what’s the cause and effect of this new development? And, what does it mean if you’re already invested or planning to invest in oil? Read below to find out!
In May 2018, the Trump administration refused to recertify the nuclear deal with Iran. This decision sent prices for Brent crude, the European benchmark, above $80 per barrel for the first time in four years. This number was nearly three times the cost for Brent crude in 2016 when prices hit a low of $29 per barrel.
Under these sanctions, U.S. companies are no longer allowed to buy crude oil from Iran, leading to about a million barrels of Iranian oil a day coming off the global market as a result. Because the U.S. will not provide waivers for European energy companies to continue to do business in Iran, prices for crude oil are predicted to surge.
How High Will Prices Surge?
Not as high as $100 per barrel says Joe McMonigle, senior energy policy analyst at Hedgeye Risk Management, and a former Department of Energy chief of staff. It seems that near $90 a barrel is a plausible price. (Keep in mind that current prices are at $80 per barrel.)
What Does This Mean For Your Investment?
Just a few years ago, the U.S., as a significant importer, would have preferred to see lower oil prices. However, with the recent revolution of shale oil production that led to a massive increase in domestic production, the U.S. now benefits from higher crude oil prices as they lead to increased investments (like yours), job creation, and tax revenue!
To learn more about U.S. oil and gas investment opportunities, contact Cannon Operating today!