Saga Nagoya Securities has recently stated that Oil prices were trading higher while profit-taking following last week’s rally offset the support from the possibility of supply disruptions.
Key analysts from Saga Nagoya Securities highlighted the fact that Crude futures on Thursday marked their highest close in more than three years, as rising tensions in the Middle East and OPEC’s commitment to rebalance the market continued to feed price climbs for the second consecutive month.
Oil has enjoyed a big bull run in 2017, having risen by 25 per cent so far, but market participants are likely to deal with increased volatility in the months ahead as a broad range of political, economic and financial events unfolds.
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The brisk rally in crude prices also came on U.S. administration’s desire to tear up the Iran nuclear deal, with forecasts clustered in a range of $50-$60 have now widened to $80-$90 for the second half of this year.
Such concerns compounded existing supply worries which are heightened by plans of OPEC and its allies to maintain oil production cuts until 2019, extending their campaign to wrest back control of the global market.
Jonathan Richards, Head of Corporate Trading at Saga Nagoya Securities commented “The option of prolonging the deal until next year is currently on the cards as a resultant gain of almost 30 per cent since June means that most players will not take the risk of spooking the market.”
Favorable economic conditions around the world are also supporting demand, thus a repeat of sanctions would double the expected supply deficit by the end of 2018.
Nevertheless, bullish sentiments over the outlook for oil prices might be contained by the rising U.S. oil production which is set to grow further in the coming months. The increase in supplies could see oil prices struggling to rise significantly in the long term, although short-term price expectations have become anchored around $70 per barrel.
”Once these events pass, Oil traders will shift focus to the major fundamentals where the market is more concerned about fresh signs of rising oil production in the U.S. other than the Mideast geopolitical tensions,” added Jonathan Richards, Head of Corporate Trading at Saga Nagoya Securities.