Brent touches a new 2-year high

6 November, 2017

Oil prices continued to march higher on both sides of the Atlantic early Monday. In the early trading hours, Brent reached a high of $62.44, a level last seen in July 2015, and represents a 40.8% surge from June’s lows. There’s no doubt that OPEC and Co. have been a major influencer of the most recent rally, but oil traders have a new political risk to consider, in the coming days and weeks. The anti-corruption crackdown in Saudi Arabia resulting in the arrest of 11 princes, and dozens of senior officials, led many traders to question how oil prices will be affected. 

Given that OPEC’s strategy is unlikely to change and the 1.8 million barrels a day production cuts will be extended when the organization meets on November 30, fundamentals remain supportive for high prices. The last thing Saudi may be thinking of, is returning to the market share battle, as prices above $6o provide great support for the listing of Aramco in 2018 and these prices are essential for the Kingdom’s economic transformation plans. From the demand side, the outlook is also positive, with the global synchronized economic growth at strongest levels since the financial crisis. The critical question now is how the political situation develops from here. I think current market fundamentals justify a price of $60 - $62, but any further extension in the rally would likely be an additional political risk premium.

The response from the U.S. shale industry is of great importance at the current stage. Exports from the U.S. have risen to a record 2.13 million bpd in the week through Oct. 27, according to EIA and after five consecutive weeks of falling rig counts, are we going to see a reversal due to the rising oil prices?  Most Probably. As we approach $60 for WTI most of the U.S. shale companies will become profitable, and such additional output, will put a limit on any price gain.

The backwardation in Brent has fueled speculative long positions to benefit from rolling over future contracts. However, given net long positions have reached record highs a short squeeze will likely pressure prices despite the geopolitical risk premium.

Overall, I think prices are currently approaching the higher end of the trading range for the rest of the year, and will be looking for a mean reversion towards or below $60 in the weeks to come.    


Source link  
Yuan firms on Dollar weakness

Global investors will likely remain on high alert throughout the end of the week to see if the largest market sell-off since early 2018 will...

EM currency weakness refuses to go away

Tuesday has seen stability in Chinese markets following a very nervous beginning to the new trading week yesterday. Signs of China market stability...

Yuan eases on risk-off sentiment

Financial markets have entered the new trading week on negative footing as a mixture of different market themes weigh on investor sentiment...


Risk assets under pressure from rates

Chinese equities took a big hit after traders returned from a week-long holiday. Efforts by the People's Bank of China to free more than $100 billion...

U.S. Treasury Yields boost the greenback

The U.S. Treasury selloff on Wednesday was the biggest story in the financial markets. This time it wasn't only the rate-sensitive two-year yields that marched higher...

NAFTA deal fails to lift global risk appetite

Global investors remained defensive on Tuesday despite the U.S. and Canada agreeing to a new trade deal ending months of uncertainty...


Dollar steady after Fed raises rates

In a widely expected move, the Federal Reserve has raised its key interest rate by 25 basis points for the third time this year. The central bank...

Markets prepare for Fed meeting

The resumption in concerns around trade uncertainties, the upcoming Federal Reserve policy meeting and general political risk element that...

Could the Dollar be turning the corner?

Currencies throughout Asia have welcomed the news that the Dollar has tumbled to a near 3-month low. A number of different currencies in the...


In the past 24 hours Bitcoin has gained 0.03% and reached $6588.08547308. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has gained 0.6352% and is now at $1.1587. Start trading and making money on Forex today.

In the past 7 days Ethereum has lost -7.34% and is now at $210.088264583. Have the most popular cryptocurrencies compared online 24/7.


Top Brokers offering Forex Market Analysis



Forex Currencies Forecasts



Top 10 Forex Brokers 2018

# Broker Review
1easyMarketseasyMarkets91%
2FXTMFXTM88%
3HYCMHYCM87%
4Alfa-ForexAlfa-Forex86%
5FxProFxPro85%
6FIBO GroupFIBO Group84%
7OctaFXOctaFX83%
8HotForexHotForex82%
9FXCMFXCM80%
10AvaTradeAvaTrade77%
  


Share: