Oil prices rallied sharply in recent weeks after the announcement of planned talks in Algeria next month between OPEC and other major producers including Russian Federation.
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The former head of Iraq’s South Oil Company, Jabbar Al-Luaibi has been appointed as the country’s oil minister and he will want to be seen to be taking positive action to help boost the country’s energy industry.
There appear to be three fundamental reasons for the rally.
Oil has charged higher since news hit that OPEC members would have an impromptu meeting on the sidelines of a conference in Algeria at the end of September, to discuss strategies to stabilize the market.
Fuel oil inventories for July in the USA were also down, falling by 1.8 mb to 38.3 mb.
Iran has chimed in, reiterating plans to raise its production back up to pre-sanction levels, raising doubts over a deal to freeze output.
The meeting ended with no deal because Saudi Arabia did not want to enter one without Iran.
The market may be getting over-confident that a deal will be struck.
If futures contracts for December 2017 rise from around $53 a barrel now to trade above $55, “we think that the global supply and demand forecasts will need to be adjusted with more.crude oil coming to the market”, the firm said.
The joke of it all, as Wallace and other Bloomberg analysts point out, is that a freeze now, with production at “incredibly elevated levels” isn’t going to be terribly meaningful in terms of paring our planetary glut.
“Oil prices climbed higher because of the USA crude stocks downtrend and positive market sentiment, led by OPEC talks”. US crude inventories dropped the most in five weeks through August 12, while fuel stockpiles slid a third week, Energy Information Administration data showed Wednesday.
Meanwhile, market players await the release of fresh weekly data from the U.S. U.S. Commodity Futures Trading Commission (CFTC) on Friday afternoon before the close of U.S. equity markets for further indications on current trading patterns from option investors. In the report, the EIA raised the production forecast for United States oil producers indicating a slower than expected decline in U.S. oil output as USA oil producers are proving more resilient to oil prices.
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The weekly chart for Brent is potentially the most important, given that it portrays a picture of a market attempting to break out of a multiyear downtrend. $53-54.30 will be a major resistance area to watch should this rally continue.
