The oil price was supposed to be soaring around now. With American sanctions against Iran taking effect earlier this month, exports from that country, the world’s fourth-largest producer of crude oil last year, were expected to shrink to close to zero. In anticipation the price of Brent crude, the international benchmark, went above $86 in early October, a four-year-high, and some warned of prices above $100 a barrel.
Instead, by November 8th oil had entered a bear market. The price of Brent crude stood at $66.53 on November 14th. West Texas Intermediate, the American oil benchmark, dropped for 12 straight trading sessions, until November 14th, when it at last ticked up (see chart). That was the longest uninterrupted decline in over three decades. American crude futures have plunged by 20% from their recent peak.
Some of the reasons for the slump are standard fare. In October the imf lowered its forecast for global economic growth. Trouble in emerging markets has an outsize effect on their demand for dollar-denominated oil, as it becomes more expensive in weakening local currencies. But the oil market’s recent volatility also reflects new forces, including the limits of conventional producers and the peculiar impact of America’s president, Donald Trump.
The Organisation of Petroleum Exporting Countries (opec), led by Saudi Arabia, aspires to cosy stability. Prices should be high enough to sustain its members’ budgets and low enough to support global demand. But its grip