Global oil prices have posted their largest monthly gain in almost six years in April. They’re up forty percent since their lows earlier this year. This could be very good for an industry hit by massive layoffs. Some people in Texas, the self-proclaimed energy capital of the world, could see this recent price rally as a return to boom time, despite knowledge that the industry is cyclical.
But banking on the higher prices could be dangerous. Georgi Kantchev, who reports about money for the Wall Street Journal, joins the Texas Standard from London. His warning? Beware the double-dip in oil prices.
“The sentiment in the market is definitely cheerful,” Kantchev says. “But on the other hand we have lots of headwinds for oil. For one, the U.S. market and the global market is still heavily heavily oversupplied. Many analysts are saying at some point there will be a need for correction.”
The price rates as they are now might not be sustainable – so why the rise in prices?
“This drive in prices has been driven by speculation. People have been kind of banking on future slowdown in supply,” he says. “The U.S. dollar has been weaker recently, especially in April, and this was very bullish for oil.”
So what does this ultimately mean for those Texas hopefuls? Once scenario could be a continuation of dipping oil prices, the other, Kantchev says, could be the new price equilibrium.
“This means cheaper fuel for the average consumer,” he says. “When you have this kind of stability even at the lower level… then it’s easier for companies to budget and plan production.”
