The near-term outlook for oil

By 14/06/2021News
morning-news

Gold  1864,06
(-0,67%)

EURUSD   1,2102
(-0,06%)

DJIA  34480
(+3,73%)

OIL.WTI  71,235
(+16,57%)

DAX   15722,50
(+3,57%)

The price of black gold has been rising on world markets over the past week. The WTI crude oil price surpassed $70 a barrel. This is the first time in 2.5 years. Why is oil rising? And what to expect from it in the short term?


OIL.WTI

OIL.WTI

API data showed another drop of more than 2 million barrels in US oil inventories. The start of the summer season in the Western Hemisphere and the increased demand for petrol from motorists are having an impact. Optimism about this continues to drive prices higher.
The second reason is the hope, not only of investors but of everyone in the developed world, that the COVID-19 pandemic is effectively over. The daily rise in new infections continues to steadily decline. Government health officials are making high-profile statements. The head of the Norwegian Ministry of Health, for example, has expressed the opinion that “the pandemic is largely over”.
We will see epidemic outbreaks in developing countries for a long time to come. But they will not have a global impact on demand. The topic of coronavirus is likely to recede into the background in 2022.
At the same time, according to the latest report from the EIA, the forecast for a recovery in US shale oil production in 2021 and 2022 has not changed much. Which gives support to black gold. After all, the rapid growth of shale production has completely tied OPEC’s hands.


What could prevent the oil price from rising further?

The main risk factor is the OPEC cartel itself. Its overcapacity is more than 5 million barrels a day. It is clear that all this idle capacity, sooner rather than later, will start pumping oil again. This will immediately lead to a surplus of supply over demand.
At the moment, OPEC’s large under-utilisation of capacity is fully incorporated into the price. Therefore, risks are constantly hanging over the market and speculators are trying to ignore them. Before the next OPEC meeting, however, there could be strong pressure on the price of black gold. In fact, many traders will want to lock in profits on the back of the most favorable situation.
It is also important to understand the following. The spread between the benchmark grades of Brent and WTI has narrowed to just $2 a barrel. Historically, when that happens, the market is near its highs.
What will outweigh it in the end? We will find out in the next couple of weeks.

06.30 Japanese industrial production for April
11.00 EU industrial production in April


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.