Crude Oil & Brent Oil Monthly Fundamental Forecast – July 2015

Outlook and Recommendation

Crude Oil prices have steadied at the US$59-60 mark for WTI and US$63-64 for Brent Oil amid a strong pick-up in global petroleum demand and a slowdown in shale production in the United States. Negotiations on a final nuclear agreement between Iran and the permanent members of the UN Security Council plus Germany get underway this weekend — likely placing some downward pressure on oil prices.

When a global glut of crude oil sent prices plunging to near-six-year lows in the first quarter of the year, refineries started stocking up. The market gave them an incentive to do so: Oil prices for later in 2015 were higher than immediate prices, making refiners and traders eager to buy crude for cheap and store it to use or sell in the future.

The strategy worked. As more and more oil entered storage, pushing U.S. inventories to the highest level in more than 80 years and prompting some companies to stash oil on ships in the ocean, the amount of crude immediately available to buyers fell. Add in a cold winter that spurred demand, and prices rallied.

But with the global oil benchmark, Brent, trading around $63 a barrel, up more than 30% from its 2015 lows, all that oil sitting in storage is now profitable to sell. This means the world’s largest oil producers are competing with each other and with their own prior production for buyers.

OPEC production has increased further in June, to its highest level since September 2012. Analysts estimates OPEC output at 31.2 million b/d, a 170,000-b/d uptick over May. With these rates, OPEC supply growth is now challenging non-OPEC supply growth

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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