Oil may be in for big reversal

10 February, 2017

The oil price rose for a 2nd straight day on Thursday on the back of a fall in US gasoline inventories, but some are starting to predict that a reversal of fortunes is just around the corner.

At 2.55pm (GMT) the oil price was trading at $53.02 a barrel down from $52.36 in yesterday’s trading.

The U.S. Energy Information Administration reported on Wednesday that gasoline inventories fell by 869,000 barrels last week against expectations for a for an additional 1.1 million barrels.

The number pushed the oil price higher, but some such as Boris Schlossberg, BK Asset Management's managing director of foreign exchange strategy noted that at such prices ,oil will struggle to find customers,

"I think oil is in a very dangerous zone now precisely because demand is not there," he said.

He also predicted that $50 a barrel was a critical point, and if oil moves down towards there then breaks through, the commodity could be in for a big fall,

"The irony of this whole thing is that OPEC cuts are holding, but the demand is not there.And the longer oil wallows at this $52 level, the more likely it's actually going to go to the downside. And if it trips to $50 a barrel stops, I think it could really tumble very quickly. So I think we're in a perilous territory," Mr Schlossberg added.

Some other factors that may affect the oil price in the nearest future are the amount of oil rigs coming on line in the US, chasing the $50 plus a barrel prices as well as Donald Trump’s policy, if it eventuates, to open up Federal lands for oil drilling which analysts predict will flood the market.


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