The price of oil keeps rising! Tonight, WTI oil reached its latest high of 40.40 Dollars. With currently 39.90 Dollars, the market can maintain this increased level even now. The chart shows the price trend since June 1. Two events are currently pushing the oil price further upwards. Let’s take a closer look at this.
US labor market data pushed stock prices and oil price up just before the weekend
Last Friday at 2:30 pm German time, the US labor market data was reported much better than expected. Instead of minus 8 million there were 2.5 million new jobs in May, completely unexpectedly. This of course gives rise to justified hopes that the US economy will recover quickly from the corona crisis, which means that the demand for oil could also pick up again more quickly, as is generally assumed. Markus Fugmann (get well soon!!) has critically examined this completely unexpected joy about the US job market today (here the video, very informative). Whatever the case may be. Immediately after the announcement on Friday, the WTI oil price jumped up together with the share prices. It went from 38.48 Dollars quickly up to 39.50 Dollars.
OPEC pushes oil further upwards
After the oil price ended Friday at $38.87 on a CFD basis, we then saw rates above $40 today, as mentioned above. Currently, the market is holding just below $40. The euphoria has increased over the weekend, because OPEC decided on Saturday to extend the time frame for its supply quantity cut, which was used to counter the immense drop in demand as a result of the corona crisis. The hope that hung in the market all last week was confirmed. The cuts by OPEC and its external partners were extended from June to July, which can be seen as a minimal compromise between the partners. Thus, the 9.7 million barrels per day cut after May and June now applies until the end of July.
But rather restrained euphoria?
The expectations of some analysts were that the cuts would be extended by 3 months. But now it became one month. If one only goes by today’s oil price, then the market reacts positively to Saturday’s result. At least for now. Will the price of oil perhaps come back a bit when the US starts trading this afternoon? Now it will be interesting to see if countries like Iraq (we are already hearing the first rumours) will really stick to the cuts until the end of July.
It is understandable. The oil price has recently risen sharply. There is of course the desire to produce more in order to get more money into the national treasury. But the longer and more consistently OPEC and its partners hold out on the cuts, the better it would be for a sustained recovery in the price of oil. After all, the quantity of demand has to increase more sustainably after the corona crisis. Currently, there is a rumour circulating that, beyond the cutback deal, voluntarily implemented cuts by some Gulf states (above all by the Saudis) could not be continued in July. Could this put pressure on the oil price later in the day?