Oil prices: the downside potential is limited – Commerzbank

FXStreet – the extension of The production cuts by oil-producing countries to nine months, the market has acknowledged a decline in price. Much further prices will fall but little, as the production cuts have been implemented according to initial estimates, probably in may, more strictly, said Barbara Lambrecht, Commerzbank market analyst.

Important Quotes:

In the run-up to the OPEC meeting, Oil prices had been growing strongly: in the middle of the week a Barrel of Oil of Brent cost with good 54 USD more than 10% for more than two weeks earlier. However, the expectations had been screwed up so high that even the decision to extend the production cuts in order to nine months was sobering, and the price of Oil significantly dropped.

Too low of the price during the coming week is not expected. For one thing, the survey-based estimates of news agencies will show that the production cut was implemented in may, almost completely and nearly all countries have shouldered their part of the load.

On the other hand, the US stock data will confirm that the reduction of Production shows an increasing effect and the offer lags behind demand. In the U.S., the inventory overhang has reduced noticeably, wherein the crude oil inventories are still about 25% higher than the average of the last five years.

Against this Background, a Barrel of Brent is likely to cost more than 50 USD. At the latest, in the fall the price is likely to soften further, if the discipline is likely to ease in the implementation. Because the OPEC countries are unlikely to allow you to lose more and more market share to Shale oil producers in the United States. Under “pressure” are the Russian companies that have made their shareholders a higher production. At the end of the year, a Barrel of Brent crude is likely to cost less than 50 USD.

** FXStreet News Editorial, FXStreet**

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