Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
S&P SEASONAL ANALYSIS - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Oil Climbs over $50: Can Investors Bank on a Recovery?

Commodities / Crude Oil May 27, 2016 - 10:04 AM GMT

By: The_Energy_Report

Commodities

The price of a barrel of oil has almost doubled from its low of $28 at the start of the year, prompting speculation that a recovery is underway, which may result in the revival of companies in the exploration, production and services sectors that have foundered since prices collapsed in 2015.


According to news reports published today (Thursday, May 26), the pop above $50/bbl can be attributed to a drop in supply. The U.S. Energy Information Administration's "Summary of Weekly Petroleum Data for the Week Ending May 20, 2016" notes that "U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.2 million barrels from the previous week."

Since breaking the mark the price has sunk below the $50 level, but hovers in the vicinity, as it has for the past few weeks.

Reuters reports neither Brent nor WTI has topped $50 per barrel since fall 2015.

Among the reasons for the drop in supply, the BBC cited wildfires in Canada, which affect oil sands production. Other factors include political unrest in Nigeria and increases in demand from China, India and Russia, disruptions that are "offsetting higher production from Iran and Saudi Arabia." The Wall Street Journal, in an article also published today, noted "a weaker US dollar" supported the boost in oil prices.

What does the news mean for investors in the energy sector? There is no clear answer, as reports caution that despite the rally, prices could remain volatile. Adam Laird of Hargreaves Lansdown is quoted by the BBC as saying, "It's too early to say this is the beginning of the big rebound."

The Wall Street Journal notes, for example, that while the jump "came with concerns that higher prices could just unlock more supply," some analysts see the move as a "psychological boost to a market that has been trading below that level for seven months now."

Goldman Sachs has said it expects "oil prices to consistently hit $50 a barrel in the second half of 2016 and $60 by the end of 2017," according to the BBC.

And from Reuters: "[S]ome market watchers say oil's climb to above $50 for the first time in seven months could spur producers, particularly U.S. shale drillers, to revive scrapped operations that could again bloat supplies and trigger a selloff." The BBC reported that producer Pioneer Resources is looking at increased rig counts at the $50 level.

Another factor will be the reaction of the Organization of Petroleum Exporting Countries (OPEC) to the oil price surge. Investors, Reuters notes, will be looking "for signs of a output hike now that oil had reached $50."

In an article published last week, Dr. Kent Moors of the Oil and Energy Investor observed that, while breaking through the $50/barrel ceiling garners the attention of "talking heads," he believes the more important takeaway is that oil prices may have established a new floor at $42/barrel.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) Tracy Salcedo wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
2) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in