Brent: The Price of Oil Has Returned Below The Level of 50.00. Fundamental Analysis as of 27.05.2016

Brent: The Price of Oil Has Returned Below The Level of 50.00. Fundamental Analysis as of 27.05.2016

27 May 2016, 19:24
Roberto Jacobs
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Brent: The Price of Oil Has Returned Below The Level of 50.00. Fundamental Analysis as of 27.05.2016

Due to sharp reduction of crude oil reserves in the USA, yesterday, the price of crude oil Brent has broken psychologically important level of $50.00 per barrel. According to the US department of Energy, oil reserves in the USA fell by 4.226 million barrels last week. The price has reached annual highs, but failed to consolidate above this level.

The price of oil has been declining for the second day amid profit taking and prior to the OPEC meeting, which will be held on 2 June in Vienna. July futures for crude oil Brent at ICE Futures fell by 0.43 USD to 49.16 USD per barrel at the end of the trading day at ICE on Thursday.

Further rise in oil prices is restrained by the prospects of the rise in the USD and probability of the increase in oil production by many oil producers. At the same time, oil prices are supported by recent disruptions of oil supply in a number of countries, including Canada, Nigeria, Libya, Venezuela, and the fall of oil production in China and the United States.

On the other hand, the decrease in supply can be easily compensated by the increase of oil production by the OPEC countries. In April, global oil supply has increased by 250 000 barrels a day, while production by OPEC countries has increased by 330 000 barrels a day, due to the increase of oil production in Iraq, Saudi Arabia, Iran.

In view of the prospects of the increase in oil prices, OPEC is unlikely to freeze or restrict oil production at its upcoming meeting in July. It means that competition in the oil market will continue. Some economists believe that if the price exceeds the level of 50.00, the new trading range of oil will be between the levels of $50-55 per barrel.

Today’s news will include US GDP for Q1 (it is expected that GDP will grow by 0.9%) and index of personal consumption expenditures at 14:30 (GMT+2). Later, Mrs. Janet Yellen will give a speech, which, is expected to clarify the prospect of interest rates increase in the United States.


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