Crude oil prices reached the $50/bbl threshold today as expected in our Oil price Commentary published earlier this week on Monday. The rise in oil prices to this level came after two weeks of recovery following its recent collapse bellow $40/bbl. As the time of writing this update, Brent and WTI crude crossed the $50/bbl and $48/bbl respectively.
In addition to the support oil prices are getting from OPEC’s output freeze talk and IEA’s forecasts, oil prices were supported today by declines in both U.S. crude oil and gasoline inventories by 2.5 million barrels and 2.7 million barrels respectively.
Despite the recent gains in oil prices, some of the investment banks are still expecting prices to fall again. This week, Morgan Stanley’s oil analysts came out with a new report which suggests that the oil rally might end on Wednesday. Today it is Thursday, and not only the oil rally is still there, it is now gaining more momentum due to the sharp declines in U.S. gasoline and crude inventories this week.
The rally in oil prices will not stop at this level and prices will continue rising. However, with the current rise in oil prices, the risk to its sustainability at this level rises as well. That is due to the fact that, the rise in oil prices encourage shale oil producers to resume drillng activities and oil production.
However, in the maintime, it is important to note that OPEC’s expected talk will continue to support oil prices for the short term until outcomes of the talk decide if that support will continue or not.
Stay ahead of oil prices moves by subscribing to the Weekly Oil Price Commentary. Subscribe here.Â
Share this:
