Short supply reports encourage oil market with prices soaring

Posted 18 February, 2019

The oil prices finished the previous week at the 3-month peaks, soaring above the $66/bbl handle. In total, the Brent oil quotes gained more than 6.5% over the past week and hit $66.40/bbl for the first time since late November.

The main drivers for the observed upturn in the oil market were reports about the suspension of activities at some sites of the biggest offshore oilfield Safaniyah. For reference, this oilfield is been developed by the national Saudi oil company Saudi Aramco. According to the news, the production at the site will be offline until at least March due to power supply problems. As a result, the global oil supply will lack about 300,000 bbl per day.

At the same time, investors usually overreact to any reports about short supplies, and it was not an exception this time. According to the market forecasts, it is quite possible that the start of the week will be marked by a price rise based on their response. However, we should take into account that the development of the oil market along with all risk assets is based on the ongoing US-China trade talks.

For now, the parties have lately managed to achieve some progress, and the negotiations will continue this week. The official representatives of Washington and Beijing called the talks ending last Friday quite effective.

In the current environment, all the factors speak well for further strengthening of Brent oil. Nevertheless, any negative signs like a return of anti-risk sentiments, can depress already high quotes during the profit taking in the market.

Previous forecast

19 February, 2019 16:16

← Statements by Donald Trump depress euro

After staying above $1.13 handle, the euro has started slackening during the Tuesday trading session. The euro posted a jump against the greenback on Monday amid slow trading during the stock exchange weekend in the USA. However, trading is getting back to normal pace today, and the euro-to-US dollar exchange rate shows a reasonable trend. The negative impact on the euro as well as support for the American currency is coming from the anxious mood at the exchanges regarding the offensive message of the US President Donald Trump towards Europe and Asia.

Statements by Donald Trump depress euro

Next forecast

15 February, 2019 17:53

Oil market likely to stay highly volatile →

The oil prices have kept improving step-by-step in the second half of the week. The Brent quotes have not only checked the $65 handle but even managed to hit it reaching some $65.14/bbl. As a result, the oil market posts quite positive week especially taking into account insufficient luck for an upward break observed lately. In th short run, persisting optimism may assist Brent prices in taking roots above the $65/bbl handle. However, this scenario can be confirmed only after the break of the 65.50 handle.

Oil market likely to stay highly volatile
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