Don't get too excited about good news in the oil market
Today oil surged on news of a huge US crude oil inventory draw. The draw was big enough that oil may continue upward for the rest of the week.
Other good news today included higher-than-expected compliance from OPEC members for production cuts and higher-than-expected oil imports to China from Iran. That means demand is a little stronger than expected, and supply is a little weaker than expected.
However, there's some bad news offsetting the good. Morgan Stanley cut its average WTI oil price outlook for the rest of the year from $58 to $55. That's below the current price of $55.86. Global demand for oil seems to be falling even as the US and China oil markets are picking up. Meanwhile, US shale producers are increasing production, and so are Venezuela and Kenya.
Oil might be good for a very short-term trade late this week, but it's unlikely that it will show any medium-term strength until the US makes progress in trade talks with China.
Other good news today included higher-than-expected compliance from OPEC members for production cuts and higher-than-expected oil imports to China from Iran. That means demand is a little stronger than expected, and supply is a little weaker than expected.
However, there's some bad news offsetting the good. Morgan Stanley cut its average WTI oil price outlook for the rest of the year from $58 to $55. That's below the current price of $55.86. Global demand for oil seems to be falling even as the US and China oil markets are picking up. Meanwhile, US shale producers are increasing production, and so are Venezuela and Kenya.
Oil might be good for a very short-term trade late this week, but it's unlikely that it will show any medium-term strength until the US makes progress in trade talks with China.
Comment:
News that the hurricane wouldn't hit energy producers after all caused a short squeeze in oil and natural gas that has had the price moving up for a few days. Oil is also benefiting from optimism about rate cuts and trade talks.
This is a persistent problem with investing in oil and gas in the climate change era: it's way too prone to disruption by extreme weather events. This happened the last time oil tried to surge, as well.