You can't blame oil future traders for having a serious case of the shakes in 2016.
Volatility has been the watchword virtually all year, with U.S. oil futures sinking to $26 per barrel in February before cresting the $50 mark by late spring (September and October, 2018 futures are trading at $53, as of mid-August, while current futures prices are hovering at $45.)
While analysts point to the spate of geopolitical issues that have roiled energy markets (African supply disruptions, a weaker than expected China economy, and a decimated Venezuelan oil market among them), experts say burgeoning crude oil inventories are holding oil prices back.
"As of now, overproduction of crude and a glut of refined products keep the commodity under pressure," says Nilanjan Choudhury, an analyst at Zacks.com, in a recent research note.
At over 520 million barrels, current crude supplies are up 15% from the year-ago period and are at the highest level during this time of the year, Choudhury notes. "As it is, improvement in oil fundamentals remain fragile with the existing stocks of refined product inventories - gasoline and distillate - remaining at their maximum seasonal levels in at least 20 years despite healthy demand," he says. "Piling on the misery is a Baker Hughes report revealing a steady rise in the U.S. oil rig count and pointing to the resurgence in shale drilling activities."
On the demand side, efficiency gains through things like new Corporate Average Fuel Economy (CAFE) standards and the substitution of oil outputs in industrial process will steer prices, says Peter Bryant, managing partner at Clareo, in Orange County, Calif., and a long-term observer of the natural resources sector. "Government regulation and mandates play a role, as well," he says.