RUSSIA (OBSERVATORY) – Oil prices reached a new local maximum. The barrel of Brent mixture came close to $ 74. What is the reason for this reaction of the market and how high prices can rise?
The last growing impetus was due to the aggravation of geopolitical tensions in the Middle East, but there are other factors that make traders play on the rise.
The oil market is already close to the balance of supply and demand, and in the second half of the year it may even be scarce. Until OPEC, Russia and other countries that participate in the agreement on limiting production, will not announce the achievement of the goal and plans for an exit and a deal, in such conditions, oil prices will only grow. By the way, the next meeting of OPEC and Russia will be held on April 20.
Bloomberg provides a graph of the dynamics of excess supply in the oil market.
Another important point is the weakness of the dollar. The US currency fell at the beginning of the year and remains under pressure. This provides substantial support for oil prices.
Short-term factors are also contributing to growth. Unexpectedly for all on the eve of the data came from the US Energy Ministry, which showed a decline in stocks across the spectrum.
Thus, oil reserves fell by more than a million barrels, oil reserves in Cushing – by 1.1 million barrels, gasoline reserves – by almost 3 million barrels, reserves of distillates – by 3.1 million barrels.
The total volume of oil and oil products in the US dropped to a minimum since March 2015, which became the main driver of oil price growth on Wednesday.
As for oil production in the US, it continues to grow, has renewed a new historical maximum, but at this stage few people care.
It is worth to say about the behavior of the ruble. In conditions of such high oil prices, the Russian currency gradually regains losses suffered after the introduction of sanctions. The high price of a barrel makes the ruble harden.
At the same time, it should be noted that oil prices in rubles make up almost 4,500 rubles, which is much higher than the index set in the budget.