This is a quick-hit article everyone ought to read to understand part of what's going on with oil prices right now.
The short version: when there's instability in a place like Libya, the market can usually mostly compensate by switching suppliers; there's a fairly flexible market in oil (I presume this wouldn't be true of a real major like Saudi Arabia or Russia, but Libya is smaller). However, in this case, the places that make the most obvious replacements for Libyan crude - Nigerian and Algeria - both have potential problems of their own now or in the near future. Result: unhappy market.
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