Oil in 3 years high!
Let's start with Goldman Sachs updated forecast for Oil Market. As the new forecasts show, Brent is to hit $90 per barrel by year-end, noting "the current global oil supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast".
Why Oil market raise so fast, there are several reasons for that. In the past two months, we had destructive storms in the US. Hurricanes Ida and Nicholas had shut down the production in the US Gulf of Mexico region when they hit in late August and September respectively. This shortage in supply caused excessive consumption of Oil inventories. On the other hand, despite all weaknesses and slowdown in the reopening process, still it is progressing and it means more demand. While the market needs more supply, OPEC+ members are committed to their production and supply quotas which means an imbalance in supply and demand. Last week we saw the impact of all these matters in the EIA and API reports. On the other hand, add the gas shortages in Europe that driving the users to Oil and increasing the demand.
Increasing Oil price is not just about the Oil price, more expensive Energy increases the producer costs, and we will have higher and steady inflation. High costs for the manufacturers, will increase the price for consumers, and at the end of the day, it means higher and steady inflation. Fear of higher inflation also means a faster start for tapering and will limit the bulls in the stock markets.
Today, for the fifth straight day, amid what had become fashionable to call “supply tightness,” Oil prices increasing. So far today WTI and Brent Oil prices, both raised more than 1.7% to trade respectively at $75.22 and $78.50. Both crude benchmarks are up more than 50% on the year, to trade at October 2018 highs.
From the technical point of view also market remains bullish, with caution, since we can see the RSI at 70 and the OBV trend line that decreasing, despite a new higher high in the chart. However, in the long term, the trend is bullish.
