Is a Double-Dip Looming for Oil Prices?

When WTI crude recently surpassed the US$30 mark, the universal sigh of relief was resounding. Optimistic analysts declared that rock bottom had been and gone, and that oil was officially on the road to recovery. While this is a viable theory, others assert that it’s markedly premature. In a worst case scenario, a double dip price drop could be on the cards.

The primary trigger behind the price recovery are current ‘production cap’ talks between OPEC countries, initiated by Russia and Saudi Arabia. While the latter two have agreed to freeze production, sceptical analysts assert that the difference between talk and action is paramount. To critics, capping production fails to address the core issue of a surplus, and could lead to another unprecedented drop.

A false sense of security

As well as predicting an ‘all talk no action’ scenario, analysts also maintain that there has been a noticeable shift in trader expectations. Optimism is a good thing, however too much could lull markets into a false sense of security. Just months ago producers were anticipating prices to drop below the US$20 mark. This fear was largely caused by an increase in Iranian oil exports, brittle global demand and the impending second quarter which generally sees a lag in consumption. All these factors are still a possibility, and analysts are adamant that producers shouldn’t drop their guard.

A multitude of factors at play

With OPEC’s production cap talks highly public, prices are expected to rise simply due to speculation that action is on the horizon. However, this eases pressure on members which can result in lethargy. A myriad of other factors could also send prices falling once again, including Russia pulling out of the price cap agreement and upping production. Major disputes between key OPEC members (primarily Iran and Saudi Arabia) and spikes in US shale output could also contribute to a double dip.

As proven by the current oil price upheaval, global markets are dangerously dynamic. As well as consistently fluctuating prices, international regulations are also continually evolving. ‘Vapour Pressure Testing of Gasoline and Crude Oil - Regulatory Changes and Resulting Possibilities’ looks at the latest regulatory changes that have hit the industry, and the extensive adjustments in process and laboratory vapour pressure testing that they have initiated. While in the past RVP - Reid Vapour Pressure was determined according to the ASTM D323 standard, automated ASTM D6378 is now the method of choice. Ideal for ethanol-blended gasoline, the triple expansion step based standard is able to perform high quality, ultra-precise vapour pressure measurements, as well as clock the partial pressure of the dissolved air.

Image via Flickr Creative Commons. Photo credits: Chris Goldberg