Oil Monthly Forecast – June 2018

Crude Oil is one of the most traded commodities online and the month of May 2018 has been especially good to Crude Oil. Crude Oil was already on Bull Run for majority of 2018, however it was during May 2018 that Crude Oil moved back above $70 per barrel for the first time in three years and 10 months. This bout of bullish rally was influenced by stronger-than-expected demand fueled by worldwide economic growth, ongoing output limits by OPEC and Russia and a series of global events that have stoked geopolitical tension. As international Crude Oil benchmark Brent hit $70 per barrel, West Texas Intermediate (WTI) of US market was trading around $64 to $65 per barrel and many analysts predicted that Crude Oil price could go high further in near future influenced by multiple geo-political conflicts which was proved true as month progressed further.

Oil Still Strong

Crude Oil price moved above $70 per barrel in both major benchmarks WTIUSD and Brent Crude by end of first week. However WTIUSD failed to consolidate above $70 on the first week of May 2018 over lack of fundamental support. With both major Crude Oil benchmarks breaking $70 psychological barrier investors choose to reset their trade orders and market saw a fresh input as trading session began for the second week of May with majority of bids in favor of Crude Oil price above $70 which helped WTIUSD consolidate above the $70 price range. The second week of May saw US breaking out of its Nuclear deal with Iran and Israel launching missile attacks on Iranian strongholds in Syria which caused a huge spike in Crude Oil price with WTIUSD reaching as high as $71.87 per barrel.

The third week of May opened with Crude Oil slightly under pressure as Iran threatened to move out of OPEC amid Trump’s tantrum and concerns of increased production in US resulted in WTIUSD testing $70 price range. While the first half third week saw crude under pressure, continued tensions in middle east and a dovish US weekly crude inventory data helped both Brent and WTI Crude Oils turn bullish and as trading session closed for the week Brent and WTI Crude Oil went as high as $79.30 and $72.30 respectively. The fourth week of May 2018 saw both Brent and WTI Crude Oil reach their highest yet in 3½ years with price reaching $80.49 and $72.89 respectively. This spike in Crude Oil price was influenced by US sanctions of Venezuela and Iran.

Oil Prices Expected to Remain Buoyant

However Crude Oil price began to decline in both Brent and WTI crude oil trades as US weekly Crude Oil stockpile data showed a huge increase in value and news started circulating about possibility of increase in Crude Oil production by OPEC & Non-OPEC members to meet demands as a supply gap created from US sanctions on two big Crude Oil Producers in OPEC block. The fifth week of May 2018 was completely dovish for Crude Oil across globe. US oil stockpile reached new heights as US oil rigs produced record breaking output in shale production and US energy companies added 15 new Oil rigs which resulted in WTIUSD price seeing a sharp decline. However this decline was capped at $65 as US Crude Oil a sudden increase in demand from Asian clients who preferred to stock up on US shale oil available at a discount compared to Middle Eastern Crude Oil before the price goes back to normal.

As of now WTIUSD and Brent Crude are trading with huge discount. While Brent Crude Price remains in line with Middle Eastern Crude Oil, US Crude Oil is trading in a discount of nearly $11 due to increase in demand and record breaking production output. Investors are currently focusing on OPEC summit which is to be held later this month to decide new Crude Oil production pact and the cartel is expected to increase the Crude Oil Output by nearly 75000 barrels. While US has increased Oil production, current trend in global Oil trade remains nearly balanced as demand and supply remains neutral due to reduction of Oil output from Iran and Venezuela over US sanctions. This weekend saw ministers from OPEC & Non-OPEC Oil manufacturing countries meet together unofficially and it was announced that they agreed on the need for continued cooperation between members of the Organization of the Petroleum Exporting Countries and other big producers to balance global supply. This week is expected to see Crude Oil continuing to trade with discount intact between WTIUSD and Brent Crude however the discount is expected to decrease before OPEC meet to decide on new Crude Oil policy.