A “geopolitical risk premium” is a fuzzy concept, roughly equivalent in today’s oil market to an extra $5 charged for each of the 6bn or so “virtual” barrels traded every day.
That the planet consumes (just) 100mn real barrels every 24 hours shows how dominated by speculators the oil market has become. This in turn explains why, alongside the many other obvious catalysts, prices have been as volatile as they have over the past few weeks.
Israel’s exchange of missiles with Iran and the launch of China’s stimulus package meant Brent crude last week notched its biggest five-session gain in more than a year. Prices briefly rose above $80 a barrel this Monday, only to slump 5 per cent on Tuesday after the National Development and Reform Commission’s latest press conference proved a damp squib.