US energy production transforms global trade

Before January ended, two major events struck the oil market that speak volumes in how global trade has been transformed by US energy production PRICE risk in 2020 is now skewed to the downside as global economic growth and oil demand are under pressure from an outbreak of coronavirus. Oil futures surged in reaction to the US targeted killing of Iranian General Qasem Soleimani on January 2 but sold off less than a week later as Iran took steps to avoid war with the US, quickly unwinding an escalated geopolitical risk premium in global oil prices. Ten years earlier, global oil prices would have spiked $20 bbl in response to the attack instead of the $5.50 realised in early 2020, and the price increase would have been more enduring. Four months earlier, an attack on Saudi Arabia’s largest oil processing facility had a larger price impact amid lost supply and fear of war in the Middle East. A quick response by Saudi Arabia in meeting customer obligations alleviated market concerns, with oil prices retracing the advance in less than two weeks. Abundant supply due chiefly to record high oil production in the US has adjusted the trajectory for global oil prices in response to...