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Crude Oil Up 30%

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Crude Oil Up 30%

The global markets posted oil futures lower at the end of June 2016, after the largest single-session hike recorded in April this year. 

They stay high, however, with the best quarterly resulting gain on record since the middle of 2009.

  • Supplies of U.S. crude oil have been declining over the last six weeks. 
  • There have been considerable disruptions in output caused by a significant amount of wildfires experienced in Canada in May.
  • There has been an increase in demand on the stockpiled supplies, and they have shown a decline in the wake of this.

Viewing the graph below it is possible to show the New York Mercantile Exchange crude oil prices for the month of June 2016:

j4.5

It is showing an overall positive trend since 2016’s second quarterly report.

  • With future prices gaining approximately 25% in the year’s closing second quarter, the year-to-date gains are set at 33%.
  • The reasons behind the rise and fall of traded crude oil prices in the US are
  • The EIA (Energy Information Administration) released information showing that US supplies dropped over 4 million barrels which were more than the expected amount in the week ending on 24 June.
  • Further reports demonstrate that refineries have increased production in expectation of higher demand over the holiday season.
  • The effects of the uncertainty about the Brexit (Britain’s shock leaving of the European Union) has burnt out slightly as a “sit back and see” attitude is tested out by investors.

With these factors in play, the refiners are managing to stay abreast with the higher demand expected for the holidays. 

Reaching the production level that is needed in the long term may not be attainable.

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Key evidence for this prediction for bullish long term crude oil understands the high demand from countries like India and China. 

Relative stable growth is stemming from these sectors and a foregone conclusion that the request is not likely to fall. 

The graph below clearly displays the steady growth and demand in India for crude oil and its desirability as a commodity:

j4.6

The US weekly crude oil production that has taken a slight dip. 

This has sparked the concern in the markets that supplies will be depleted in the short term due to holiday demand and the long term due to global needs.  

West Texas Intermediate (WTI) prices have risen above the $50 mark, and this leads to speculation as to whether this is a sustainable elevation. 

Supply in Canada has picked up after the fire outbreaks, and there are still copious quantities of well over half a billion barrels. 

This is the largest stockpile in 86 years.

It can be seen that global oil output, held against the demand for the commodity, will always come up in a shortfall, looking back at the graphs.

The energy markets in the long term do not allow for any minor political upheavals to reflect anything other than a small fluctuation, before reverting to more fundamental predictions.

As a viable energy alternative, natural gas futures also have shown movement after the EIA in the US reported the commodity’s supply was down by an estimated 9 billion cubic feet from analyst’s predictions ending June 24, 2016. 

These results were conducted by S&P Golden Platts and included the stocks in the Pacific region within the time frame as well.

What is keeping analysts and investors in the energy commodities markets tuned in is that the supplies and stockpiles staying abreast with the national demand.

What can be expected to service the requirements globally as well?

The long-term outlook for all energy commodities is bullish. 

This is shown by the present supplies being used during the holiday season and the expected demand from the countries outside the US.

A more stable political environment in some of the oil-producing countries like Iraq is also impacting the energy markets. 

With the uncertainty removed from some of the potentially upsetting factors on the world stage, it is making it easier to predict that supplies and stockpiles will be funneled to the right channels and satisfy the market’s anxiety.

Energy commodities will remain highly desirable in this respect. 

It is safe to say that as long as all these key points stay in play, the long-term viability of oil prices staying bullish are expected.

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