Still, the external backdrop for oil has been so strong and favourable that our past thinking has not yet been very realistic. In the future there will still be a decline in oil, but why there is such an increase now, let’s look into it.
Still, Hurricane Ida did a lot of business in the Gulf of Mexico, so quite a number of rigs have not been able to resume operations so far. One positive factor has been the strong decline in oil stocks in the USA. Stocks in the US have fallen significantly. But there are also signs of a possible imminent correction. Data from China, the main exporter, showed that oil consumption was at a record low for the last 15 months.
However, speculators who are very interested in the level of 80$/barrel are now in action. They might try to take that level by the end of the year because, first of all, the energy crisis in Europe is still going on. Gas is not going to fall. Secondly, the quantitative stimulus programme continues in both the US and Europe. This is going to have a big impact on the price of energy. Thirdly, winter and the heating season are starting, which will contribute to price adjustments. Fourth, economies are picking up. Imports need to increase in order to ensure GDP growth. With a pandemic and closed industries, this is harder to do. Oil demand is likely to grow faster than production growth.
This implies that the oil market will be quite volatile with a probability of a rise to the $80 mark. Of course this market is influenced by so many different factors and cannot be predicted long term, but the current situation at the end of 2021 shows that oil is in good demand.
14.30 US Durable Goods Orders for August
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