UNITED STATES (OBSERVATORY) – Oil prices reached $ 75. This happened for the first time since November 2014. How high can the quotes go?
Now the main drivers of growth are geopolitics and market balancing. The efforts of OPEC and Russia to reduce production have paid off.
The excess supply from the market disappeared, and the extremely high demand in February actually led the market to a balance. In many respects it became possible because of Venezuela. The economy of the country is in distress, production there is steadily declining.
The aggravation of the situation in the Middle East also does not allow traders to calm down. Tensions between Saudi Arabia and Iran, Iran and Israel, as well as the Saudis and Yemen, have recently intensified. By the way, the day before it became known about the death of the leader of the Yemeni husits - the head of the Supreme Political Council of Yemen Saleh Al-Sammad – as a result of the air strike of the Air Force of Saudi Arabia. It was on these news that the quotes grew by almost $ 2.
It is also important to note the sentiment of market participants who directly deal with futures contracts. This “bullish” attitude has never been before. In fact, almost nobody sells oil, everyone only plays on increase.
The net long position of traders in contracts for Brent and WTI crude oil, as well as futures for US gasoline and heating oil reached a record.
In other words, speculators are aimed to further move prices upward.
It is interesting to note here one important point. It seems that a big game for raising was planned long ago. In the autumn of last year, increased activity in the options market was noted. Someone from the big speculators actively bought options “call” with expiration in December 2018 and strike $ 90. In other words, the calculation was that prices by the end of this year will cost over $ 90.
Since at that time such contracts were very cheap, the implementation of such a scenario would bring a huge profit to the buyer of these options, increase investments by several or even dozens of times.
Based on this, we can assume that in the foreseeable future we will see further growth in oil prices – at least another $ 15.
OPEC + statement: oil reserves are not low enough
Oil reserves in the countries of economic cooperation and development (OECD) are 2.83 billion barrels, which is still a lot to complete the deal to reduce oil production, the OPEC + monitoring committee told the meeting in Jeddah (Saudi Arabia) on Friday.
“The countries participating in the agreement demonstrated an unshakable commitment to achieve a rebalancing of the world oil market, as evidenced by the high level of implementation of the production reduction plan at 149%,” the Committee’s final communiqué (JMMC) notes.
“As a result, OECD commercial reserves were reduced from a peak of 3.12 billion barrels in July 2016 to 2.83 billion barrels in March 2018, which corresponds to a decrease of 300 million barrels. However, the committee noted that current commercial reserves remain above the levels observed before the downturn in the market, “- noted in the committee statement on the outcome of the market discussion.