Oil Bulls Target $70
Oil is on a four-day hot streak that has seen it break out of its range to target $70 a barrel, sending the oil bulls on a rampage. So what’s causing it?
The months-long game of push and pull between OPEC’s supply cuts and the US’ record oil output levels seems to be leaning towards the OPEC side of the equation. With the US mulling over more intense sanctions on both Iran and Venezuela, conditions on the supply side of the oil market look set to tighten, while demand-side hindrances ease.
Healthy economic data out of China and the US has helped offset concerns about a weakening demand environment that would put considerable downside pressure on oil prices. Recent data has shown returning factory activity in the US and more consistent manufacturing growth out of China helping to put a bit more oomph back into investors’ confidence in the demand-side factors driving the market.
Hedge funds and other money managers have also been increasing their bullish bets on oil, with net long positions increasing by 33 million barrels, while net short positions declined by 4 million since Monday. That’s quite some surge!
What we may see in the coming days is a slight pullback as investors grapple with the new psychological $70 barrier, before more upside as supply conditions remain tight and optimism over an impending trade deal drives more bullish sentiment for global markets.
Never a dull moment in the oil markets!