Crude oil stalled its recent rally ahead of OPEC members meeting, which will commence in June 2019. the OPEC postponed the April meeting, which was due on 17th April 2019.
The benchmark Brent Crude Oil spot (XBR) rose from the level of $50.41 (Day’s low on 26th December 2018) to the level of $72.27 (Day’s high on 12th April 2019). The, the prices stalled its rally near the recent high of $72.27 and are currently hovering at $71.50 mark.
Crude oil prices rose till the present level amid disruption in the supply chain caused by various factors, such as production cut from the OPEC members, U.S. Sanctions on various oil exporting countries and Civil war in oil producing Libya.
OPEC voluntarily declined its production to support the crude oil prices to boost their high crude oil dependent economies. The production cut by OPEC raised supply concerns in the past and supported the crude oil prices.
The United States banned the export from various oil exporting countries such as Venezuela and Iran, which added to the production cut by OPEC and created a supply shortage in the market, which in turn, supported the crude oil prices. The U.S. exerted ban on Venezuela to control the monarchy of the president, Nicolas Maduro, who used the oil as a medium to transfer the wealth from the general public to the oligarchy of the country.
The United States further suspended the export from Iran amid Tehran’s nuclear ambition, which threatened the national security. These bans of oil exporting countries created a supply gap in the global market and supported the crude oil prices.
In the recent event, Libya entered a civil war, when forces of Khalifa Haftar launched an air-strike on Tripoli, which is protected by the agreement from the United Nations (U.N). The civil war hampered the day-to-day activities of the country, which further reduced the global supply of oil, and in turn, supported the crude oil prices.
However, in the recent scenario, the U.S. increased shale oil production which addressed the supply concerns in the global market, and thus, halted the rally in crude oil prices. Apart from the building U.S. Shale oil, critics and market participants believe that the OPEC channelized the high oil prices, to reduce the dependence on high oil prices.
The prediction of the critics and the market participants will become clear after OPEC commence the meet. The consortium of oil producing nations will decide upon the production guidance for the coming quarter of the year 2019. Some market participants believe that the OPEC will restore the production to the normal level and if that happens, coupled with the rising U.S. Shale oil it might exert the pressure on crude oil prices.
However, some market participants believe that the OPEC will keep the production of 1.2 million barrel a day out of the market, which will boost the crude oil prices.
To gauge the direction of oil prices further from its narrow movement, the market participants are eyeing on the outcome of OPEC meet and the U.S. Shale oil production.
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