Expectations of higher oil prices

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Expectations of higher oil prices


April 2, 2016 8:53
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The eyes among oil traders and investors as to the outcome of the Doha meeting on 17 April next, called for by Qatar's oil minister and current president of «OPEC» and involving the oil-producing countries of «OPEC» and outside after the meeting, which was held in February last in Doha between Saudi Arabia and Russia, and Venezuela, where the decision was made to freeze the production of these countries.

Traders waited in the oil market results of the visit of Saudi King Salman bin Abdulaziz to Moscow. Understanding the evolution allows betting on an agreement between the two countries on oil production management, while the visit of King Salman includes a priority of the Kingdom to discuss with Russian President regional political files. The oil market is witnessing these days, fluctuations in the price of a barrel «Brent», which falls on the day and brings in another, but it remains between 37 and 40 dollars, fluctuations are not justified by market factors that are the same. There is a lot of oil in the global markets and commercial inventory is very high and the freezing of production, which was adopted did not have any impact on the reality of the market, but gave a psychological signal that there may be an intention by the major exporting countries to start reducing their production. But the fact that the production of these countries reached its maximum level in January (last January), which means that the decision to freeze it at this level is to stay on the planned level. It did not make any real change, especially since Russia has never committed to decisions to reduce production with «OPEC», but has been tasked during this meeting to convince its ally Iran to freeze its production, noting that Iran's oil minister confirmed that it will not happen. Iran is determined to increase its production by 400,000 barrels per day. So it is not expected to take any decision to reduce production in the Doha meeting and at the meeting of «OPEC» in June (June), because Saudi Arabia will not cut production for the benefit of others in and outside the organization. But there is a significant development that could help raise the price of oil after June is that shale oil production in the United States began to shrink with the closure of a number of small business operations for the production of shale oil, following a drop in the price of oil to $ 35 in the United States, where he is no longer economically useful for small businesses to continue its operations. There are expectations of experts and traders in the oil sector that demand will increase after June due to low oil shale and improved growth and the beginning of the decline in stock.

One of the oil market experts said that even with the prospect of the arrival of 400,000 barrels of Iranian oil a day to the market in June, demand for oil will exceed supply, expecting a little rise in the price of oil. But expectations even if it came from the oil trade experts are not always accurate, on the contrary, no one expected one day to reach a barrel of oil to $ 140, as happened a few years ago, and no one is expected to deteriorate to 30 and $ 40 so quickly as it is today. It is said that investors in the oil trade benefited in a great form of the fragility of the markets because it gives them the opportunity, when the price of crude down to buy it to store it and sell it later when prices improve. It is difficult to make sure that the price of a barrel of oil will rise after June, because the demand will exceed supply and will enter many factors into account and it is not always just supply and demand, but speculation and psychological factors also affect the price level. The Doha meeting was psychologically gives an indication leads to raise the price a little bit, but it will not change anything in the supply and demand factors, also did not change anything the former Doha meeting, which decided to freeze production was not in all cases producers are determined to increase their level in January.
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