Oil prices remain volatile

Mixed messages leave analysts scratching heads

How will we know we’re out of the woods if we can’t see the forest for the trees?

The heightened volatility in the already unpredictable crude oil markets after every piece of industry news this week has alternately sparked a sense of optimism that the worst of the price plunge is behind us and corresponding pessimism that the slump will get worse yet.

A report on the resiliency of U. S. oil production from investment bank Goldman Sachs halted a rally early this week before traders were heartened by Saudi Arabian oil minister Ali al- Naimi’s prediction of a quick return to higher prices. The prospect of sanctions on Iranian crude exports being lifted and a record storage increase in the U. S. sent battered oil markets tumbling again.

Rallies seemingly give way to sell- offs daily as hope and fear see- saw.

“Dead- cat bounces” and “head fakes” are cited as reasons for the volatile swings in commodity markets as often as fundamentals around supply and demand. Lately, we’ve taken to starting the day in the Herald’s business department with a quiz: “Oil up? Oil down?”

Predictions are running at about 50- 50. Essentially, it’s your guess is as good as mine.

The same caution applies to casual observers unfamiliar with the nuances of global oil markets as much as the industry experts brimming with the latest data and geopolitical insights.

Royal Dutch Shell’s $ 70 billion US takeover offer for British Gas on Wednesday was widely speculated to be the catalyst for companies to take advantage of the price rout and open what consultants Woods Mackenzie suggested will be the “floodgates” for oilpatch mergers and acquisitions.