Brent crude accelerated to its loftiest level in three months last Friday; topping $67 a barrel as the global oil benchmark extended a rebound from below $50 in late December. Although this impressive bounce (oil is up approximately 30 percent since January 1st) is nevertheless being regarded in the situation of its sudden drop in the final quarter of 2018, which saw it spiral lower from above $86 a barrel in October.
That sell-off, which occurred as the health of US shale oil output again wrong-footed traders, still hovers over the market despite OPEC and its allies moving to aggressively cut production. As a reaction, the market looks to be experiencing a kind of post-traumatic sell-off disorder. But supplies do now appear to be tightening, headed by Saudi Arabia’s determination to curtail production and exports by even further than it agreed in December. Whilst sanctions on Iran and Venezuela’s crude oil exports have served to tighten supplies further this year.
But most traders still have one eye on America. With crude back above $65 a barrel; US production has proceeded to expand, reaching a record 12m barrels-per-day last week, according to the US Energy Information Administration. Thus Brent crude’s spot price could easily reach $70 a barrel in the forthcoming days or weeks. Especially if concerns over the US-China trade spat continue to abate. But there remain uncertainties about the sustainability of the move, considering the continued production rises in the US. A persistent deterioration in oil inventories globally may demand to be seen before that shifts.