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BUNKER INDEX :: Price Index, News and Directory Information for the Marine Fuel Industry
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The uptrend continues

07 Nov 2017 10:01 GMT

By A/S Global Risk Management.



Brent is trading around levels last seen in 2015 and the uptrend seems strong. If the next resistance level around USD 66.80 is broken we could be looking at different levels in general. Bear in mind, though, that much has changed since 2015 where oil prices were well above USD 100.

Likely the decisive factor for the recent surge has been events in the Middle East. On Saturday, a missile was fired against Riyadh Airport in Saudi Arabia. Iran was blamed, as the missile allegedly was fired by the Iranian backed Houthis of Yemen. This event seems to have lid a fire under the Saudi-Iranian dispute. Though no barrels are affected at present, a lot of barrels could potentially be at risk as both countries are major oil producers.

But events like this (geopolitical risks) are likely not the only reason for the current uptrend. If we look to the US, the rig count continues to decrease, which is another bullish indicator. However, production of US crude is at its highest since 2015, which is a strong bearish indicator. Additionally, US exports of crude are record high as well. So how can this be coupled with the strong prices? Most likely the answer is global demand, which seems to be gaining strength as financials for especially China and the US have been improving.

The supply/demand situation will continue to be tight as long as the supply can't keep up with the demand. For now, it looks like the only ones being able to offset are the American shale producers, as OPEC and "allies" could prolong their production cuts at the meeting in Vienna at the end of this month.



A/S Global Risk Management is a provider of customised hedging solutions for the management of price risk on fuel expenses. The company has offices in Denmark and Singapore. For further details about its risk management products and services, please call +45 88 38 00 00 or email hedging@global-riskmanagement.com.


Image: Michael Poulson, Oil Risk Manager at A/S Global Risk Management. Image credit: A/S Global Risk Management




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