A drop in the supply of oil from the North Sea and the explosion at a Chevron Corp. (NYSE: CVX) refinery in California show just how fragile the crude supply chain is. Each incident pushed oil prices higher, at least for a short time. The refinery accident caused gasoline prices to spike several cents throughout much of the western part of the United States.
The two problems are part of a much longer list of factors that could push Brent back toward $110 or $120. Among them still are trouble in the Strait of Hormuz due to sanctions placed on Iran, an unexpected result in the Venezuela presidential election or an unexpected rise in Chinese demand. The notion that oil prices will remain low could be nothing more than a wish.
Douglas A. McIntyre