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Crude bulls are keen to see action taken following the surge in Brent spot prices since the beginning of the year. Brent has grown nearly 25% since the beginning of the year, reaching $ 67 a barrel after 2018, but it could stagnate in the immediate future, unless another catalyst n & # 39; Appears and does not increase or decrease Martijn Rats, a Morgan Stanley equity analyst and commodity strategist.
Where we were: The Organization of Petroleum Exporting Countries and Allies, such as Russia, began further cuts in production in January to balance global oversupply, a threat to markets in 2018. As well as Iran, the slowdown in investment spending and output growth of American shale companies, as well as the lower dollar forecast, reinforce the firmness of crude oil prices. Rats writes in a report released Friday.
The factors that threaten the case of Bull are the growth in production outside Opec, Opec's continued loss of market share partly due to growth in production outside Opec and higher levels oil in transit. In anticipation of the December OPEC meeting, member countries increased their oil exports, as they had done before the OPEC negotiations of late 2016. Supplies from Floating storage are also rising. This means that there is a lot of "oil on the water," Rats said. Historically, "it has taken time for the global oil system to digest this."
What's up: Regulatory changes, which limit the amount of sulfur in bunker fuel, are likely to disrupt the oil market. The International Maritime Organization will cap the level of sulfur in fuel at 0.5% from January 2020, against 3.5% currently. The global average sulfur content is about 2.5%. The so-called IMO 2020 requirement could give a boost to demand growth, but Rats argued that non-OPEC growth could easily meet this need. The actual impact of IMO regulation on the supply / demand dynamics of crude oil is uncertain.
Speculation about the strength of Brent fell after climbing earlier this year. Sentiment on Brent "was clearly bullish in 2019," wrote Macquarie Capital analyst Vikas Dwivedi in a report released Monday. But much of this change took place in late January and early February, and the sentiment has changed little since, as bulls look for more evidence to support their conviction in early 2019.
Moving forward. The Brent will likely remain stuck around $ 65 a barrel until a new catalyst makes it – up or down, Rats wrote. He maintained his price outlook of $ 65 per barrel for 2020, citing forecasting difficulties. The Trump administration has always expressed concern over the rising impact of oil prices on the US economy. The White House said at the end of last year that it was striving to ensure that the IMO 2020 unfolds "in a way that does not harm consumers and the world." "World economy" in an email sent to the Wall Street Journal.
Major energy stocks have also not seen a rise in oil prices. the
SPF S & P for exploration and production of oil and gas
(XOP) rose by just over 6% from the nearly 25% gain in oil. Major oil tanker
Exxon Mobil
(XOM) recently suffered a degradation in the quality of its software,
Chevron
(CVX) seems to be in better shape.
Remaining immobile and admiring these beautiful cumulative gross gains since the beginning of the year are perhaps the best choices for an oil investor until the dynamics of supply and demand are clearer.
Write to Crystal Kim at [email protected]
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