Perhaps this is a bit premature, but it looks like oil prices are going to start going up again.  Based off a combination of Cushing, OK storage levels not increasing much and the Saudis saying they were going to charge more for the oil they will send to Asia, oil futures have gone up.

Looking at it, the storage levels at Cushing actually went up, just less than they have recently.  And the Saudis only bumped their price up a dollar.  So it’s pretty tenuous.  It seems that investors are looking for a reason for oil to go up in price, and this is a reason, be it what it may.  I’m not convinced that this increase will stick.  I expect prices to start consistently going up this summer or fall.

T. Boone Pickens in an interview with the Wall Street Journal said that we’ll see our stock of oil drop because rigs have been idled.  That will begin to be reflected in the price of oil in June 2015, and he expects oil prices to be up to about $70/bbl by the end of 2015.  I certainly am not privy to the information he has, but I am happy to say that the information I have run across would lead me to completely agree with him, and that I previously come to the same conclusion.

The takeaway for West Virginia mineral owners is this.  If you’re on the fence about signing a lease, and think you could wait until the end of this year or the beginning of next to sign, I think it would be a good idea to wait.

This is the kind of thing that adds so much unpredictability to the oil and gas market.  Yemen is an oil producing country, although it doesn’t produce a lot.  It also happens to be next door to the second largest oil producing country, Saudi Arabia.  Russia is number one, in case you were wondering, and the U.S. is a close third, with the likelihood of being or becoming number one very quickly.  But that’s beside the point.

Yemen has seen a lot of turmoil lately.  President imprisoned, president escaping, president declaring new capital city, rebels taking over, suicide bombings, all kinds of crazy stuff.  I feel for them.  I’d hate to be living in that kind of a political situation.

Today, Saudi Arabian jets carried out air strikes in Yemen.  Oil prices jumped a couple dollars as a result.  Why?  It doesn’t seem to me that it should.  Stockpiles of oil are very high, and it doesn’t appear that any oil fields or pipelines were targeted.  At least, there’s nothing in the news to indicate that they were.  There are shipping lanes that run right next to Yemen, but they are not being disrupted at the moment, either.

So it seems to me that oil prices jumped because of unpredictability.  Yemen is becoming less stable, and Iran and Saudi Arabia are involved, so of course oil is suddenly more valuable.  That’s the way the market works.  It’s weird, but it’s true.

Edit: I’d like to point out that the very next day oil prices dropped almost the same amount that they had jumped.  Everybody had a minute to look at the situation and realize it wasn’t all that bad after all.  I’d also like to point out that somebody in Saudi Arabia knew that the strikes were going to happen and that oil prices were going to jump because of it.  Somebody probably made a good chunk of change in the stock market.