Brent at $ 75: the five factors driving the price - FT

The Financial Times (FT) is out with following key five factors that are driving oil prices, as Brent oil reached $ 75/ barrel for the first time in four years.

1. Supply and demand

The simplest reason for the rise in oil prices is that markets have tightened markedly over the past 18 months. Inventories of crude that had built up during the glut of 2014-16 have largely been worked off because of strong demand driven by a booming global economy and supply cuts by Opec and Russia.

2. Opec and Russia

So if oil inventories are back to near normal levels will Opec and Russia look to end their supply cuts, which have removed at least 1.8m b/d from the market since the start of 2017? Most traders and analysts think not. While Moscow has expressed greater concern about the impact of $70+ oil on stimulating rival supplies like US shale, it seems content, for now, to stick with Opec, whose de facto leader Saudi Arabia has indicated it believes there is more work to be done.

3. Geopolitical risks

The most immediate risk is the very real possibility of Donald Trump, US president, choosing to withdraw from the Iran nuclear deal and reimposing sanctions on its oil exports. Second is Venezuela, where oil output has already fallen by at least 500,000 barrels a day because of the economic and political crisis in the country.

4. Hedge funds

Hedge funds and other speculators have been attracted to oil this year but only partly because of the geopolitical risks. Investors were already heavily long the market, having built up a record position in crude at the start of the year.

5. US shale

US shale is outstripping expectations for growth, with total US output expected to expand by roughly 10 per cent, or 1.4m b/d this year.