International oil prices hit the largest monthly increase in a year and a half. How far can this wave of gains go?
2023-08-01 16:07:53 Source: Financial Association shared to:
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In the past July, if you want to select which assets that performed poorly during the year suddenly rose at the beginning of the second half of the year, then the international oil price will obviously be “on the list”…
Market data shows that U.S. WTI crude oil futures have risen by more than 15% in July, and Brent crude oil has also risen by about 13% in the month, both of which are the largest single-month gains since January 2022.
With prices back above the $80 mark, U.S. WTI crude oil has now erased all its losses from the start of the year on expectations the Fed is coming to an end to its monetary tightening cycle, while crude demand is surging at a record pace amid OPEC+ production cuts speed growth.
In fact,Thanks to the strong performance of oil prices in the past month, in the US stock market, energy stocks also took the lead last month, leading the major sectors of the S & P 500 index:
Currently on the supply side, the reduction in supply from major OPEC+ producers Saudi Arabia and Russia has greatly improved the outlook for oil prices. Earlier this month, Russian Deputy Prime Minister Novak said Russia would cut crude oil exports by 500,000 barrels per day in August, and Saudi Arabia would continue to extend crude oil supply curbs.
According to the TASS news agency, Russian Energy Minister Nikolai Shulginov said recently that in accordance with its commitment to OPEC+, Russia reduced oil exports in July and intends to do so again in August. Seaborne oil flows at Russia’s Baltic and Black Sea ports fell to their lowest levels in seven months in the week to July 23, according to ship-tracking data monitored by the media.
Goldman Sachs analysts including Daan Struyven and Yulia Zhestkova Grigsby said in a recent note that “a combination of record high demand and supply cuts from countries such as Saudi Arabia have brought the oil market back into deficit and The market has gradually abandoned pessimism about economic growth.”
At the same time, inventories in the largest oil storage center in the United States are also falling rapidly. Inventories at Cushing, the Oklahoma storage hub, have fallen by 7.5 million barrels in the past four weeks, bringing the level to the lowest since May.
That has underpinned a widening of the backwardation between WTI’s two nearest-month contracts – which is now hovering near its highest level since November last year, reflecting bullish sentiment on the oil market.
How far can this upward trend go?
Banks including Standard Chartered Bank and UBS Group have recently predicted that global crude oil supply and demand will further tighten in the coming months, and the shortage of crude oil may continue to intensify.
On Friday, the OPEC+ Ministerial Joint Monitoring Committee will hold an online meeting to review the latest market conditions to assess the impact of production cuts led by Saudi Arabia and Russia.
“Changes in supply conditions will continue to drive prices higher,” said Yeap Jun Rong, market strategist at IG Asia Pte in Singapore, referring to the impact of the latest production cuts. Next, all eyes will be on the highs at the beginning of the year, which will May determine whether oil prices can break out of the medium-term range.”
Of course, in the short term, the current crude oil market is not risk-free after a sharp rise in July.
Some analysts pointed out that the continuous rise in oil prices means that its 14-day relative strength index (RSI) has risen to close to 70, a level that indicates that the market may be overbought in the short term and may face a downward adjustment.
At the same time, some oil ETF investors have recently begun to cash out. According to media statistics, a basket of 14 oil ETFs recorded a total of more than $400 million in outflows last week, the largest outflow since March 2022.
Dennis Kissler, senior vice president of trading at BOKF in the United States, said last week: “Oil prices continued their bullish trend in July on the back of ‘risk-on’ sentiment in equities, which kept buyers in the crude sector. But due to speculative buying, the market It’s gone up too far, too fast, and it’s creating overbought conditions, so we should see some erratic corrections soon.”
2023-08-01 08:07:53
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