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Price Of Oil Settles Lower As U.S Crude Stock Rises

Published 01/16/2017, 05:38 AM
Updated 07/09/2023, 06:32 AM


There has been a huge crisis in the energy sector in the last year as the price of oil and coking coal kept on dropping. Most of the professional oil traders were overly worried since the price of oil broke much critical support level in the market. Due to the ongoing energy crisis in the global world, the OPEC decided to put a cap in the production of oil the bring stability in the energy sector. The OPEC member stated that they will limit the production of oil to bring stability in the energy sector. Such a drastic event from the OPEC member has not been taken since 2008.The oil price found a stable ground in the global market and rallied higher after hitting a critical bottom at 27.05.Most of the professional oil investors in the financial industry went long after the announcement of the oil cap and they rallied the nice bullish movement in the market. However, in the last week, the price oil slipped in the market after hitting a critical resistance level at 58.36.The leading economist is suggesting that bearish fall might be imminent in the global market in the near future.

Oil price slips in last trading week: Most of the professional oil investors are currently booking their profit in the oil market as the price is trading near the critical resistance level. Most importantly there has been a formation of the bearish reversal signal on the weekly chart in the Brent chart. The leading investors are considering this bearish candlestick formation as prior indication imminent fall in the market. If the bears manage to take control of the market firm this level then you will see the price at 53.02 in the upcoming week. On the other hand, OPEC has stated that they were not expecting 100 percent participation in the oil cap from the leading oil producing countries in the world since 60 percent participant will greatly reduce the current supply of oil in the global market. However, if all the leading oil producing countries involved in commodities trading become an active participant to bring the stability in the oil price then we will see another sharp rise in the price of oil in near future. Meanwhile, Saudi Arabia and Kuwait has declared that they have already reduced their production cap in the market to bring stability in the energy field. Most importantly they have also stated that they are going to limit their oil production further more in the near future which will help to reduce the current supply of the oil.

A different approach from the leading oil producing countries: In order to bring stability in the oil price the researchers are suggesting active participation from all of the leading oil producing countries in the world. Some of the countries like Iraq and Iran is currently producing a huge volume of oil in the global market and this has fueled up the oversupply problem in the oil industry. Currently, Iraq is producing more than 6 million barrel per day and most of the leading investors are anxious about it since such a huge amount of oil is most likely to drive the price oil lower in the market. In this regard, Iraq representatives stated that they are not ready to limit their current production of oil in the global industry since most their economy is mostly dependent upon the oil industry. On the other side due to recent pull out of massive foreign troops from the Iraq government, there is no one to control this current situation. If things go in this way then the current demand will always be low in the market due to the oversupply of oil.

Rise in the U.S crude stock: In the last week, the oil price sharply dropped in the global market as the U.S crude stock data surprised the global economy. The news release surprised the oil investors since the current stock of crude in the U.S increased to a great extent. The price of crude oil was down by 0.96% and traded at $52.48 a barrel after securing a high at $53.50 on Thursday. There has also been a major decline in the price of Brent oil on the ICE Futures Exchange in London. It incurred 0.89% loss in the global market and traded at $55.50 a barrel. On the other side, the number of active oil rigs has increased to 523 from 12 in the last one year in the U.S economy and most of the researchers are thinking that such dramatic increase in the number of oil rig will definitely create bearish pressure in the price oil. However, the U.S government has stated that they are not going to produce excessive oil in the global economy and they will also take an active part in the oil cap production. But most of the investors are now concern about this validity of this statement as the U.S crude stock rise in the last trading week.

Summary: The price of oil started its bullish momentum in the global market after hitting a critical support level in the market. The OPEC oil decision gave the price oil a strong solid support in the market and many investors were able to pull their profit in the market on that event. However, things are not going as expected and the oversupply problem is still prevailing in the market. Though some of the countries like Kuwait and Saudi Arabia has already limited their current production rate but active participation from 60 percent of the OPEC members are required to bring the stability.

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