Strong rally in the oil future price: Investors are overly cautious about the fifth consecutive weekly gain in price
There has been a steady rise in the oil price and the market traded fairly higher on Friday securing a fifth consecutive gain in the live market. The current rise in the crude oil price with decent volatility has eased the producer to a certain extent. Crude CLZ6.+0.73% added more than 22 cents or 0.14% to settle the price of each barrel at $ 50.85 in the new York mercantile Exchange. According to the FactSet, the most active contracts also gained about 1% in the last week. the price of Brent crude ended with 0.3% loss in the last week but Brent crude LCOZ6 added more than 40 cents which lead the barrel price to $51.78 which are equivalent a rise of 0.8%.The price of crude oil found a decent support after the Russian energy minister Alexander Novak coordinated the major oil producer to stem the two-year slide in oil price. Novak is also going to travel to Saudi Arabia to further intensify the growth oil industry so that the consumers find a solid stability in the price of crude oil.
The head of state of the owned oil company Rosneft said that he is not ready yet to limit the production of the oil yet. Moreover, he has raised the capacity to 200 million metric tons a year or 4 million barrels per day which are an astounding increase in the production oil in the recent days. The average oil production by the Russian economy has exceeded 11.2 million barrels per day which have clearly given the first position to Russia in terms of oil production. Being the largest oil producer of oil in the month of September Russia has gained strong control over the oil price in recent days. Recently Russia has collaborated with OPEC so that they can limit the production of the oil but due to lack of determination and clear commitment the attempt was not successful. Though the attempt forms the Russian government failed, OPEC had decided to cut the total production of the oil from 200,000 to 700,000 barrel a day .But the main fear of the OPEC remains within the overall sentiment of the market since the non-OPEC producers might take the advantage of this change in the market. The U.S consumer sentiment is also vulnerable to increased price of oil since more active oil rigs pumping in the U.S will create a unique scope for the shale players to widen their spigots. The active oil rig climbed from 11 to 443 rigs in the last week which is the extreme result of the eight consecutive rise in the oil price.
On Friday the price of U.S oil rose more than $50 a barrel even though the stronger U.S dollar limited the rise in the price of the commodity. The delivery of the U.S crude futures for December went up by 0.36% at 50.81 a barrel which is very close the Wednesday’s four-month high of $51.94 a barrel. The Brent contract also rose about 0.56% which resulted in $51.67 a barrel. The overall market is extremely bullish at the current production level of crude oil and keeping this in mind the OPEC is going to arrange a meeting on November 30 to bring stability in the rising price of crude oil. According to the last agreement of the OPEC, they have put a cap on the production of the oil which 32.5 million to 33.0 million per day. This outstanding decision to bring stability to the rising oil price took place in the conference of Algeria. However, such a huge restriction in the blooming industry will require prompt action from the respective authority. On the contrary, the commodity market is much more stable in this month since the bullish move of the commodities trading has been restricted to a great extent due to pending interest rate hike decision by the FED.
Though the oil price is skyrocketing in the recent days but the sharp cut in Chinese oil production due to their falling inventories has created some balance in the price of the oil industry. Refined product price like gasoline and diesel have also fallen to a certain extent from the very beginning of this month. The sharp cut in the production of china’s oil has resulted in a significant amount of drop in the production for the top 5 global producers in china. The oil price is increasing with nice bullish pace whereas the price of the stock is falling pretty hard since US and China have taken initiated to slow down the production of the oil in the world. If the world leading economy like the U.S and Europe take proper initiate then we might see a decent balance condition in the price of oil in the next year.
The ongoing energy crisis and an immense amount of oil production have created chaotic situation among the leading traders of the oil. According to the government data of Singapore, the Asian stock has started to rebalance the ongoing energy crisis to meet the consumer demand. The oil production has been increased to a great extent over the last two years and leading economist researchers are suggesting that it’s high time to cap the production of the oil to maintain balance in the world economy. Considering all the parameters and the global economic conditions commodity investors are overly cautious since the bullish move in the oil price might get stuck in the upcoming days.