At the auction on 18 August oil futures Brent and WTI crossed $50,16 and $47,41, respectively, showing an increase of more than 20% of local minima, recorded on 2 August. This means that from a technical point of view, the oil market returned to bullish trend (bull market). Based on the news, traders dispersed prices even higher with October futures for Brent on Thursday evening briefly exceeded $51 per barrel. As at 21:45 Moscow time the barrel of Brent crude traded on the ICE Futures exchange at $50,71, and the American WTI on the NYMEX at $48,14. This is an increase of more than 21% since the lows of early August.
The Brent crude becomes more expensive for the sixth day in a row, demonstrating the longest rally since March, 2016.
On the background of excess supply in the US, the WTI discount to Brent continued to widen. The last time WTI traded so cheap relative to Brent (the international benchmark) in December 2015. The glut of oil in the United States was more than expected at the beginning of the year, explained to Bloomberg’s chief commodities analyst at BNP Paribas in London Harry Chilingiryan. “WTI makes no sense to be strengthened relative to Brent, as this will spur U.S. imports of light sweet crude oil [linked to the price of Brent],” says Chilingirian.
In a bull market, quickly replaced the “bear”. From the beginning of June to end of July WTI and Brent fell by 20%. But in August the situation unfolded
Support prices are now providing a reduction of oil reserves in the United States, as well as expectations of measures to stabilize the market, which can take on an informal OPEC meeting in late September. The oil reserves in the U.S. fell last week by 2.5 million barrels to 521,1 million, the report of the energy information administration of U.S. Department of energy (EIA). Surveyed by Bloomberg analysts predicted that the index, by contrast, will increase by 950 thousand barrels. Gasoline inventories decreased by 2.7 million barrels, up 232,7 million
“Suddenly, a sharp reduction of stocks of oil and gasoline [in the U.S.] caused a jump in prices,” said Bloomberg analyst Global Risk Management Michael Poulsen. — Yesterday, the weekly data on stocks was significantly below forecast. Traders still hold the opinion that a surplus of oil stocks will not hit the market as much as previously thought. “The steady decline in gasoline stocks in the United States the third week in a row, as well as discussions about the freezing-OPEC production partially offset by pressure “bears” the market,” said The Wall Street Journal, a leading analyst in the commodity markets, SEB Markets Bjarne Schieldrop.
The prices also favor hedge funds and speculators, which replaced the cycle of bets on cheaper oil to cycle bets on its appreciation. “When the data about record short positions trend gives way to the Arctic, the situation is quite dramatic,” said The Wall Street Journal Bob Yager Mizuho Securities USA. In addition, the market is driven up statements out of OPEC, he says. At the end of the informal negotiations today, the Minister of energy of Saudi Arabia Khalid al-falih said that oil producers in September can take action to stabilize the market.
Published on Thursday data the Joint oil statistics initiative (Joint Organisations Data Initiative, JODI) that is a leading world oil exporter, Saudi Arabia, increased in June oil supplies abroad have not been able to prevent the “bulls” on the market. Index in June rose to a three-month high of 7.5 million barrels per day. However, according to the company Oil Movements, which tracks the movement of oil tankers in the four weeks to 3 September, oil exports from OPEC (excluding Ecuador, Angola, Indonesia, and Gabon) will be reduced by 330 thousand barrels per day, to 23.54 million barrels, compared with four week period to 6 August.
According to the former head of OPEC Akiba Halila, OPEC members may agree to freeze mining as the extraction of the largest exporters — Saudi Arabia, Iran, Iraq and Russia — is already at the maximum. The oversupply on the world oil market has already reduced, and the market, apparently, will return to equilibrium in the next year, he added Khalil. But, as stated by Bloomberg, the chief investment officer of hedge Fund Armored Wolf Family Holdings John Brynjolfsson, the fundamental reasons for continued growth in oil prices he sees. He noted that excess oil production is still not overcome, moreover, the oil-producing countries do not demonstrate any willingness to reduce production.