Volatile Crude Oil Trading Likely On Months Of August
Last week’s price swings may be a good indication of the volatile trading we are likely to see in the crude oil market over the coming weeks. Although demand for petroleum products has shown slight signs of improvement, prices above USD70 do not seem to reflect fundamental realities. Spare capacity in OPEC countries is at elevated levels and demand for crude oil is projected to fall by 2.5 mbd this year, according to the IEA. Strong equity markets and a soft dollar could keep this price level in sight, however.
Over the medium term, the buildup in Inventories will need to be chiseled away before recent gains are supported by fundamentals. In terms of dead weight tonnages, tankers floating at sea being used as oil storage are near record highs, according to the available data that begins in 1982. A dramatic shift in investor sentiment coupled with weak underlying fundamentals could force WTI oil prices back toward USD50. In the absence of this shift, prices could remain in the USD60 - USD70 range.
Over the medium term, the buildup in Inventories will need to be chiseled away before recent gains are supported by fundamentals. In terms of dead weight tonnages, tankers floating at sea being used as oil storage are near record highs, according to the available data that begins in 1982. A dramatic shift in investor sentiment coupled with weak underlying fundamentals could force WTI oil prices back toward USD50. In the absence of this shift, prices could remain in the USD60 - USD70 range.
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