[ad_1]
Oil trade has declined in recent weeks as conflicting data pulls prices in different directions. But, according to some, a correction may be underway.
John Kemp of Reuters Noted In his weekly fund trading column, market movements were relatively indifferent to oil futures last week, all thanks to mixed signals from the industry and the media on the direction of oil fundamentals. They were a little more interested in petroleum products than crude oil futures, but that was as far as the activity went.
In a way, this speaks of moderate price volatility, at least to the chagrin of some traders. But when you have, on the one hand, the IEA and OPEC claiming that oil demand will remain 8.1 to 9.1 million bpd lower this year than the previous one, and on the other hand, High frequency data suggesting that this demand is picking up in some markets, it’s easy to see where the high moderate volatility is coming from.
Yet, from another point of view, traders can expect a correction. This is what Nathan Batchelor of Capital.com suggested in a analysis earlier this week. Citing technical analysis, he suggested that oil could experience a major correction this week before the start of the next price rally.
If the rally does not materialize, which is always a possibility, prices will fall again as disappointed traders sell off. Oil was already down early Tuesday after starting the week with gains, mostly due to reports that China was preparing to increase its imports of crude oil from the United States, in line with trade concluded between the two countries last year.
On the other hand, the Energy Information Administration said in its latest report on drilling productivity, the drillers added wells in the Permian and the Bakken. While not unexpected, any news about a rebound in U.S. shale oil drilling tends to put downward pressure on prices amid pessimistic oil demand forecasts, and despite projections. that supply will soon decline enough to drive up prices. The last to come out with such a projection was Bank of America, which said he expected Brent to hit $ 60 a barrel in the first half of next year thanks to the tightening global oil market.
Related: Uncertainty Raises Oil & Gas Mergers & Acquisitions
“In June, we increased our oil price forecast by $ 5 a barrel (/ bbl) and argued that Brent would average $ 43 / bbl in 2020 and $ 50 / bbl in 2021,” analysts said. of Bank of America. But today, they see a deficit on the oil markets in the second half of the year, to the tune of 4.9 million b / d, to drop to 1.7 million b / d in 2021.
Some may argue that it is far too early to talk about deficits, especially since some OPEC members, notably Saudi Arabia, increased their production as early as July. But if demand rises more sharply, the excess supply, at least, could shrink to levels that would support higher prices.
For now, all eyes are on OPEC +. The group is meeting on Wednesday to discuss the progress of its production control agreement. While no changes are expected in this deal, traders will be careful to smell the general sentiment in the cartel, which from this month is easing production cuts from 9.7 million bpd to 7.7 million bpd, to remain in effect until the end of the year.
OPEC + is unlikely to cause the oil price correction some are anticipating, but a surprise inventory from the EIA, which also reports on Wednesday, could do so. The EIA was report large stocks pulled over the past three weeks, the total exceeding 20 million barrels.
By Irina Slav for OilUSD
More Most Popular Readings From Oiluka:
[ad_2]
Source link