May 28, 2017

Crude Oil Prices Moving Higher in 2017

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Crude Oil Prices Moving Higher in 2017

By Richard Cox

Market activity has grown in terms of the level of attention that has been given to assets like the US Dollar, precious metals, and the S&P 500.  But there are other areas of the financial world that could see some significant rallies in 2017 if the Trump administration is able to make good on many of its campaign promises in the first 100 days.

One of these assets is crude oil, as market investors have started to price-in higher volatility in valuations as demand levels are spurred by infrastructure spending and higher GDP output.  This means that investors using cfd trading strategies will be in a strong position to capitalize on many of these trends as the latest economic data reports are released.

Crude Oil Trends

The United States Oil Fund LP (NYSE: USO) had a roller coaster ride in 2016. Before closing at $ 11.31 at the on the 25th of January this year, the fund carved out a trading range of $7.67 to $ 12.45 in the process. The stock has generated a massive return of 47% when we are making comparisons from the lows of the February.

The USO ETF tracks the movement of oil prices by investing in derivatives with near-month expiration and then rolls over each month.

Chart View:  United States Oil Fund (NYSEARCA:USO)

In 2016, crude oil prices have made a multi-year bottom near $26 in the month of February, and since then the crude has moved upward to hit a high of nearly $45 per barrel. The extraordinary rise of more than 100 percent from the lows in crude oil was fueled by supply outages, wildfires at Canadian Fort McMurray, political unrest in the oil-exporting countries, and supply cuts by the OPEC nations.

Oil Production Levels

Also, between February and June, the oil production in the United States has dropped to 8701 barrel per day from the 9179 barrel per day, supporting the rise of the crude oil prices. During the year, emerging economies like India’s crude demand had grown by 15 percent compared to the previous year while the China’s consumption has also zoomed. These factors had supported the rising oil prices in 2016.

The IEA has estimated to have an increase in oil demand by almost 1.3 million barrel per day in FY 2017. Also, the price estimate from the World Bank indicates an average price value of $55 per barrel while that of BofA indicates an average of $ 59 per barrel. 2017 is expected to have a great revival in the Eurozone, Japan, USA and the Brazil, which will support the crude oil demand.

At the same time, the demand from India is expected to grow to 4.49 million barrel per day from 4.33 million barrel per day. These factors along with the production rationalization decision by the OPEC nations will continue to support the oil prices. As the USO invests in the oil futures, the fund is set for another blazing year.  

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