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Despite the efforts of OPEC+ to bolster crude prices through production cuts, their success has been limited over the past two months. The alliance, consisting of 23 nations, initially announced a significant reduction of 1.7 million barrels per day in April, in addition to a prior commitment in October to decrease production by 2 million barrels daily. However, the impact of these measures proved short-lived, as crude prices experienced a mere two weeks of rise following the April cut, followed by a subsequent four-week decline that erased approximately 15% of their value. Similarly, the previous pledge to cut 2 million barrels fared even worse, resulting in only a few days of price gains before plunging to 15-month lows in March.
On Sunday Saudi Arabia committed to implement additional production cuts starting in July with the price of crude oil rebounding strongly on Monday in response. The Kingdom announced that its output would be reduced to 9 million barrels per day, representing a decrease of approximately 1 million barrels compared to May’s production levels. The possibility of extending these cuts further was also mentioned by the Saudi energy minister. Concurrently, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed during a weekend meeting to lower their overall production targets by 1.4 million barrels per day, effective from January 2024.
These measures aim to provide further support to oil prices, which have experienced a decline in recent months due to concerns surrounding global economic growth and sluggish demand. However, it is unlikely that the Saudi supply cuts alone will result in a sustained increase in prices, in the short-term. This is attributed to weaker demand, stronger non-OPEC supply, slower economic growth in China, and potential recessions in the United States and Europe.
Also, Saudi Arabia increased the official selling price of its crude to Asian buyers. However, this decision has led Asian refiners to seek more affordable alternatives from West Africa, Russia, and Iran. Saudi Arabia’s recent surprising actions have yet to yield the desired outcome, as oil prices quickly retreated to their pre-OPEC+ meeting levels within a single trading day.
The United States foresees a slower rate of oil consumption growth in 2023, approximately half the rate observed in 2022, largely due to declining diesel usage, as stated in a government report. Additionally, trade data from China released on Wednesday reflected weakened global demand.
Source: Tradingview
From the onset of this year, oil prices have experienced a decline of around 10%, mainly influenced by a sluggish recovery in China and the Federal Reserve’s aggressive monetary policies that have weighed on demand. According to official data released on Wednesday, Chinese exports experienced a decline for the first time in three months in May. While this may be partly influenced by the comparison to a year ago, it also signifies weaker global demand.
While oil traders displayed minimal concern regarding Saudi Arabia’s production cuts, the International Energy Agency (IEA) has cautioned that higher prices are anticipated in the near future, with intensified stock draws projected for the second half of 2023.
Overall, over the past three months crude prices have been fluctuating in a wide range between $63.64 and $81.28. While the latest output cut could boost the price towards the $80.00 mark, a sustained move above these levels is unlikely in the short-term. Further consolidation in the next few months is likely to be seen, with a gradual recovery towards $90 in the last quarter of 2023.
Active traders looking for magnified exposure to oil may consider our +2x Long WTI Oil or -2x Short WTI Oil ETPs.
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Notice
If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.
If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.
Risk Warnings
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.
Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
United States Visitors
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.
Persons accessing this website in the European Economic Area
Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Exclusion of Liability
Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
Leverage Investment
Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.
Cookies
Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.
This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2.
By clicking you agree to the Terms and Conditions displayed.
