Crude oil prices reached their highest point in over seven months on Monday, putting an end to a two-week period of declines. This strong rebound was driven by mounting concerns regarding the tightening global supply conditions. Recent optimism in the oil market has been fuelled by expectations that major oil-producing nations will continue to maintain strict production limits. The growing expectations that the Federal Reserve will leave interest rates unchanged in September has also supported crude prices.
It is widely anticipated that Saudi Arabia will extend its voluntary reduction of oil production by 1 million barrels per day into the month of October. This extension is likely to trigger further rise in oil prices and is part of the coordinated supply restrictions led by the Organization of the Petroleum Exporting Countries (OPEC) and their allies, collectively known as OPEC+.
In the United States, the demand for oil remains robust, as evidenced by a consistent decline in commercial crude oil inventories over five of the last six weeks, according to data from the U.S. Energy Information Administration. Recent activity in the options markets has seen a surge in bullish sentiment, with call options volumes on U.S. oil futures reaching their highest levels since May.
The primary driving forces behind the latest movement in crude oil prices are the anticipated additional production cuts from major oil-producing nations, particularly Russia and Saudi Arabia. Saudi Arabia is expected to continue its voluntary 1 million barrel per day (bpd) production cut into October, while Russia has already implemented a reduction of 300,000 bpd in September, following a 500,000 bpd cut in August. Traders are now eagerly awaiting an official announcement detailing the planned production cuts this week.
Additionally, crude oil prices have found support in growing expectations that the U.S. Federal Reserve may be nearing the conclusion of its interest rate hiking campaign, and indications that China’s efforts to stimulate economic growth may be gaining traction.
In China, the unexpected expansion of manufacturing activity in August, has alleviated some concerns about the economic health of the world’s largest oil importer. China’s economy had been weighed down by challenges in its property sector since emerging from the COVID-19 pandemic. Investors have responded positively to recent economic support measures in Beijing, such as deposit rate reductions at major state-owned banks and eased rules for homebuyers.
Last week’s price action decisively broke above key resistance of $83.53 confirming that the bear trend from the March 2022 high is complete and that higher price levels are likely to unfold in the coming months. The potential upside price target based on the breakout is in the range between $90.00 and $93.00. The persistent growth in U.S. oil production may act as a limiting factor on further substantial price gains over the medium-term. In the very short-term a minor pull back to unwind the overbought momentum conditions could be seen, however a resumption of the rally is anticipated thereafter.
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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