Commodity Trade Mantra

Posts Tagged ‘Rally In Oil Prices’

Rally in Oil Prices is Fundamentally Driven, not Based on Speculation

Oil prices are at their highest since the start of 2017, after rising above the key $50-a-barrel mark in Sept & holding those gains. Rather than pure speculation, this move is rooted in fundamentals: falling inventories and increasing demand. The outlook for crude is no less bright as U.S. fiscal stimulus, in the form of tax cuts financed by additional deficit spending, could also send oil prices higher.

There is Nothing Stopping a Rally in Oil Prices Now

We have growing US production, regardless of where oil prices are going. OPEC is struggling to maintain compliance & doomed to make the production cut deal indefinite as every higher figure reported pushes benchmark oil prices down immediately. New US sanctions against Iran would tip the scales in a more favorable direction for oil prices, and this fact could just make the sanctions more likely.

YES - This Rally in Oil Prices has a Long Way to go Ahead

Can we finally call the crisis in oil prices officially over? Okay, maybe not completely over, or even close to almost over, but is sure was nice for a while to taste the sweet nectar of oil prices over $50, no matter how fleeting that might be. So what happened? Well, among a few things, we see the market over the next six months going well above $60 for a simple reason … surprisingly good demand.

Do Not Underestimate The Power Of This Year's Rally In Oil Prices

Oil futures are currently around $49, v/s $65 seen in the Q2 of 2015. If the futures market doesn’t expect the oil prices to rise, producers can’t lock in a profit like they might have at $65. If you can’t lock in a profit, you can’t produce as much & thus supply should theoretically fall. This has led us to say the futures price is far more important than the current or spot price.

The Current Rally In Oil Prices Is Reaching Its Limits

Oil prices have climbed by about 50% from their February lows, topping $40 per barrel. But now, with oil traders taking the most bullish positions in months while the fundamentals still have not shifted in a correspondingly significant fashion, traders have set up the conditions where oil prices could snap back to the downside.

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