The price of U.S. West Texas Intermediate crude oil extended its rally to $79.57, reaching a three-month high. The recent surge in oil prices over the past four weeks has been supported by indications of reduced supplies, primarily due to output cuts by Saudi Arabia and Russia, as well as commitments from Chinese authorities to bolster their economy, the world’s second largest.
While expectations are that Saudi Arabia will extend its output cuts into September, sources indicated that Russia is likely to significantly increase oil loading in the same month, potentially putting an end to the steep export cuts they had been implementing. Meanwhile, there is uncertainty surrounding China’s ability to fulfil its policy promises.
The market is currently grappling with the balance between tightening global supply and concerns over slowing demand due to the ongoing global economic slowdown. Tuesday’s American Petroleum Institute figures revealed a surprising build of approximately 1.32 million barrels in U.S. crude stocks for the week ending 21 st of July, which could momentarily impact market sentiment if confirmed by official U.S. government data.
Crude contracts with earlier loading dates are commanding higher prices than those with later dates, indicative of a backwardation price structure that signals traders’ belief in tight supply conditions. The six-month spread for Crude is near a 2-1/2-month high.
Market participants are becoming increasingly concerned about the trend of dwindling oil supplies, and doubts about the expected drop-off in demand are dissipating. However, some economic data have tempered gains, such as a survey indicating a greater than expected contraction in business activity in the euro zone and a closely watched survey showing a slowdown in business activity to a five-month low in the United States.
Despite the monetary tightening by the Federal Reserve on Wednesday, oil prices rose on Thursday, erasing the losses from the previous session. The market’s focus remained on the expectations of tighter supplies from major oil-producing countries, with both Saudi Arabia and Russia announcing plans to further cut production in August to bolster prices by reducing global supply.
Oil prices have been considerably less volatile over the past four months than they were between 2020 and 2022. However, changes in world production and consumption could result in price changes. While in the near-term crude oil is likely to remain within the boundaries of its current trading range between $63.61 and $83.49, in the second quarter of 2023 and throughout 2024 we are likely to see higher prices as demand rises above supply. Once key resistance of $83.49 gets broken upwards, a new primary up trend would be in place targeting $90.00 first and $94.00 thereafter.
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Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.
Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.
Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.
Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.
Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.
For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.
Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.
Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.
Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.
Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.
He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.
Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.
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