Oil has had a good ride to the upside since the beginning of the year due to the advances made with vaccination, and the opening of global economies.
With summer travel on cards, demand for oil was projected to increase, and with that the price of oil has increased significantly.
However, as I have previously commented, Oil has now reached an overbought level and faces a few headwinds.
1. Iran Nuclear Deal: With the US and Iran entering further rounds of informal talks in Switzerland over the restart of the previous nuclear agreement - version 2, sanctions are expected to be lifted before September leading to Iranian Oil flooding the market once again
2. Opec+ is expected to increase production to counter Iranian Oil in the market as the fight for market share will once again show a decline in price previously seen in 2018. Meaning Saudi Arabia and Russia will increase their production. So will Iraq.
3. With the leader of Boko Haram presumed dead, Nigeria will see infighting between the militants, and therefore more stability in its production and exports
4. Increase of EV will see oil demand declines for the transport sector
5. A high price of Oil will cause civil instability and derail economic recovery for many large economies. the Government of India, and that of China will do their best to have the price of oil reduced.
Given these headwinds as well as the overbought levels of Oil, we can expect the price of Oil to decline from its current level to the more sustainable 60 dollar a barrel mark.
With summer travel on cards, demand for oil was projected to increase, and with that the price of oil has increased significantly.
However, as I have previously commented, Oil has now reached an overbought level and faces a few headwinds.
1. Iran Nuclear Deal: With the US and Iran entering further rounds of informal talks in Switzerland over the restart of the previous nuclear agreement - version 2, sanctions are expected to be lifted before September leading to Iranian Oil flooding the market once again
2. Opec+ is expected to increase production to counter Iranian Oil in the market as the fight for market share will once again show a decline in price previously seen in 2018. Meaning Saudi Arabia and Russia will increase their production. So will Iraq.
3. With the leader of Boko Haram presumed dead, Nigeria will see infighting between the militants, and therefore more stability in its production and exports
4. Increase of EV will see oil demand declines for the transport sector
5. A high price of Oil will cause civil instability and derail economic recovery for many large economies. the Government of India, and that of China will do their best to have the price of oil reduced.
Given these headwinds as well as the overbought levels of Oil, we can expect the price of Oil to decline from its current level to the more sustainable 60 dollar a barrel mark.
