Oil Fundamental Forecast week of July 18, 2016

Crude Oil soared 1.94% this week to end at 46.29 but well below its high just a week ago. Brent oil is trading at 47.98 with a gain of 2.61%. The first half of 2016 is done with and crude oil — the lifeline of the global economy — is the third best performer in the entire non-agro commodity space, with returns of around 30.5 per cent in international markets.

Prices have rallied to the highest point in 2016, stoked by continuing outages in Nigeria and Canada and a steady decline in US oil production.

The combination of a cut by OPEC and non-OPEC countries saw global supply drop by around 4 million barrels per day in June itself.

Sabotage in Nigeria’s oil sector has been a big boost for OPEC nations, who were reluctant to cut oil output, as OPEC’s oil output rose in June to its highest level in recent history, according to a Reuters survey.

In the current context, Nigeria’s output has partially recovered from militant attacks and Iran and Gulf members have boosted supplies. Production in Nigeria has risen to about 1.9 million barrels per day (bpd) from 1.6 million, due to repairs and no major attacks taking place on pipelines in the Delta region.

We are in a situation where the $50 mark has become a new $100 mark for oil and the question now is whether oil markets will rebalance or not in the second half of this year. The answer remains yes. Even in January, when the price of oil fell to its lowest level since November 2003, the oil market re-balanced itself, though a lot of surplus oil would be added to bulging stocks.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

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