Back at the end of October, US crude oil inventories hurt WTI oil once again as it came in higher than expected at 0.9 million barrels as opposed to the -2.6million barrels.
The fact of the matter is the oversupply that has been hurting WTI and Brent Oil since the end of June 2014.
Due mainly to U.S. Shale there has been an abundance of oil which has pressured prices lower and they have in fact collapsed by more than 50% from its peaks in early 2014.
Reacting to the weaker prices OPEC (Organization of Petroleum Exporting Countries) and other oil producing countries such as Russia agreed to cut production until the end of March 2018. This move injected abit of life into oil which bounced back from its lows of $26 per barrel and throughout 2017 it has traded between $42 per barrel to this year’s high of $57.59 per barrel.
The reason behind the current stable mood now there is fear that a lack of supply which could push prices higher. In interview with Bloomberg in October, the ever influential Saudi Crown Prince Mohammed bin Salman said that he backed extending OPEC production cuts past the original date of March 2018.
His was not the only voice calling for the extension of production cuts, Russia President Vladimir Putin has also backed an extension to the very least until the end of 2018.
With both these dominant political figures supporting this move when OPEC meets this month, it will indeed signal a continuation in limiting the supply of crude oil.
Adding to the mix is the latest unrest in the middle east which has injected even more upward momentum to oil prices. Over the weekend, a number of Saudi princes and leading businessmen were arrested by the Saudi authorities on corruption charges. This move has been seen by outsiders as the Crown Prince Mohammed bin Salman consolidating his power as he attempts to make massive constitutional changes to the country. Tension in the region have increased further with a statement made by top Saudi Ministers who have said that Lebanon has declared war on the Kingdom and further sabre rattling with Iran. These latest developments are destabilizing the region with oil prices clearly benefitting.
There is also another factor to be taken into consideration on why oil prices seem to be rising and in fact it maybe now at the end of its three-year bear run. Although US Shale is expected to continue to increasing healthy production there are opinions that due to the three years of falling oil prices, investment into production has decreased which could cause further drops in supply. With that and the slow improvement in the world economy, demand for oil could increase which will in turn not only support oil prices but could even boost it to $65 per barrel in the long term.
At the end of the day, having suffered for three years, maybe it’s time for oil to have a bit of break.
The post I’m Back! Could Oil’s three-year bear run finally be over? appeared first on Forex.Info.
The post I’m Back! Could Oil’s three-year bear run finally be over? appeared first on Forex news forex trade.