The contradictory forecasts for oil

There has been a decent bullish rally in the price of Brent Oil for the last consecutive 5 months. The oil price hit the critical low at 44.52 on 20th June 2017 and found some strong buying pressure. The recent gain is the result of sudden fall of the U.S crude stock. Upon the release of the data, the West Texas Intermediate went by 1.77% and traded at $48.74 a barrel. According to the Energy Information Agency, there has been a massive decline for near about 7.2 million barrel followed by the 4.72 million barrel drop in the last week.

According to the drilling productivity report on Monday, the investors are little relieved due to slow down of the production of oil in recent days. EIA has already projected that the overall production of the oil from the newly formed drilling company will increase the Niobrara, Bakkan and Eagle Ford fields stocks only whereas the remaining company will face a deficit in the supply of oil. In the energy field when the supply decreases the demand naturally increases which creates a rise in the price of oil. Gas has also been extracted from the Marcellus field with a weighted average of 2 barrel per day. Though we have the possibility of new massive production some investors are in doubt whether the forecasted data of 60 thousand barrels per day is a viable challenge from the new drilling rigs. Some leading researchers are have already calculated that massive deficit of 30 thousand barrels per day which is only half the production of the total capacity. This clearly goes against the forecasted data and supports the rising price of oil in the global energy field.

There has also been a sudden drop in the production of U.S crude oil which resulted in the massive drop in the price of oil from the high of 2015.The falling price of oil found some solid support in the global market prior to the closing of the year 2016 after OPEC extended their oil cap policy. Though most of the leading oil producing countries appreciated OPEC’s decision still the investors were in doubt regarding the bearish threat to the oil market. The leading oil producing countries like Russia and Kuwait has already limited their current production of oil more than they expected and also stated they will limit their current production of oil to bring strong stability.

Iraq, on the other hand, refused to limit their current production of oil as the leading the leaders of Iraq said their economy is greatly dependent upon the production of oil and sudden cut in this production will greatly affect their economy. So this created an extreme level of uncertainty in the global market regarding the future of energy industry as no one was sure about the next movement of OPEC. On the contrary, the risking number of active oil rigs in the U.S economy significantly pushed the price of oil lower creating the over supply problem. On the very beginning of the year 2016 the number active oil rigs in the U.S economy was only 12 but within a period of 12 months they 578 active rigs capable of drilling oil for the global market. Such an ongoing contradiction between the leading oil producers in the global market has created a dark cloud into the investor's mind regarding the next possible movement in the price of oil.
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Weekly market overview November 12 - 16
Weekly market overview November 12 - 16
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