What is next for the oil prices

The oil market is suffering from whip lash. After plunging close to $42 per barrel in late June, and officially entering a bear market, WTI has gained nearly 10 percent in two weeks. By the end of this past week, however, prices were down again.

The latest EIA report offered a lot for oil bulls to like. Not only did crude oil inventories drop by a rather large 6.3 million barrels – one of the largest declines in 2017.

After all, a long list of oil analysts have argued that oil prices won’t start to rally until we start seeing real, tangible declines in inventories.

And the sharp price gains over the past two weeks could very likely be the result of a huge wave short-covering by hedge funds and other money managers, who had built up a massive pile of bearish bets by mid-June.

For now, there are still obstacles preventing that from happening. The market is starting to realize that despite the headline figures regarding the amount of oil that OPEC is taking off of the market, the cartel is still exporting at high levels, minimizing the impact that the cuts were supposed to have. In fact, OPEC exports jumped sharply in June, by a whopping 450,000 bpd. Of course, much of that came from Libya and Nigeria, two countries exempted from the cuts, so the other participants are still mostly complying with their commitments to pare back production. But the market doesn’t particularly care where a barrel of oil comes from – more volume on the market adds to global supply woes.

Source: Bloomberg 

Junior Trader Stefan Panteleev

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