Yet again, the global prices of oil on the week opening 11th July signaled the hike in prices of crude of all the dollar-denominated markets show a strengthening of the dollar making crude oil costlier; these rates had gone up on the worries that the global supply position is going back to a position of oversupply.
This protective trend follows last week’s fall in the prices which brought into prominence the significant weaknesses of the fundamentals on which the market was currently; added to that was the factor of enhanced increase of the production by OPEC countries that was amalgamating the whole issue.
This was the single force that was preventing the global oil markets from stabilizing and achieving a proper balance in the demand / supply equation.
Reports from the New York Mercantile Exchange the West Texas Intermediate stood at $44.76 after a fall of 65 cents; this was the US benchmark that was slated for delivery in the next month. About 7% had been lost by The WTI Future in the previous week.
Even the September delivery of the global benchmark in London, the Brent North Sea crude lost dropped 51 cents from its Friday standing and stood at $ 46.25 per barrel.
The head of commodity strategy, Bart Melek of TD securities was heard saying that though the fall last week was not as high as was expected by experts, it still led to the inventories of US commercial crude being curtailed as a result of the effect on traders to that decline.
The number of the US oil rigs that were active had gone up considerably even though they should have seen that there was a considerable dip in the production levels within the United States; had this factor not been overlooked, this situation might have been averted and would not have reached this imbalance that is prompting the sentiments that are ruling the roost right now and pushing the rates south.
A look at the Baker Hughes report that keeps a record of the number of rigs that have been active within the United States carried an indication of the things to come; its Friday report clearly showed that an additional ten rigs had been active last week.
It was not just the increase that matters but it has been happening consistently over the last six weeks with this being the fifth raise in the number of rigs that were active in the United States; last week it was 351 active rigs up from 341 the prior week.
However, Melek was not that much concerned as seen from his remarks that the increases in US production were minor; he dismissed the increases in the production of Crude oil within the US as insignificant.
The analysts at Commerzbank also had an opinion on the recent downturn and attributed the fall in prices and the negative sentiments to the bearish trend in the recent weeks.
In a client note, the Commerzbank team noted that in the recent few weeks the markets were concentrating their efforts to factors that would support the prices but that trend is now reversed with the bears doing overtime; the contributing factors were the combined increase in production and the US dollar emerging stronger.
Meanwhile, the Asian Markets also reported the reduction in the prices of the crude commenting that the gains from the US jobs’ optimistic forecast report last week had already been nullified.
The reports of about 300,000 jobs created in the US in June as against an insignificant month of May had resulted in minor gains on Friday; it did not do much to offset the 5% drop last Thursday.
A 39 cents decline was noticed in West Texas Intermediate, the benchmark of the United States which finished at $45.02 i.e. 0.86 percent lower; Brent crude stood at $46.39 with a drop of 0.79% after a decline of 37 cents.
Observers predicted that the downslide is likely to continue showing weak prices of oil as long as the number of active rigs is not brought down; more supply will ensure lowering of prices.
Moreover, the strong dollar which had received a boost riding on the improving job market opportunities will continue to make such commodities costlier for spenders of other currencies.
The pressures have been piling up since June 23 when Britain decided to opt out of the European Union; the prices of crude oil had seen a bottoming at $ 30 per barrel though some recovery has been seen.
Umrao Singh umraoz.wordpress.com
Written for: Lars-Magnus Carlsson www.thephilippinepride.com?utm_source=rss&utm_medium=rss
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