Crude Oil Price Rises as Global Demand Spikes
Binary option platform giant Banc De Binary reported on the reversal in crude oil prices on Wednesday 20 May. The turnaround was surprising given the price declines in the prior trading session as a result of U.S. government data reflecting 3 consecutive weeks of falling crude oil inventories. The exact figure that crude oil stocks fell by was 2.67 million barrels, leaving the inventories at 482.17 million for the week ending Sunday 17 May.
The EIA (Energy Information Administration) also reported that crude oil stocks in Cushing, Oklahoma dropped to 60.44 m barrels. As a result, Brent futures rose to $64.91 and the price of U.S. crude rose to $58.60. These figures are in stark contrast to the declines on Tuesday 19 May, when a 3 percentage decline was reported as the dollar rallied. The pattern that has emerged is not uncommon in the market. Declines are often followed by corrections soon afterward.
Japanese Economic Growth Boosts Demand for Oil
The price of oil also gained support from Japan’s economy. As the world’s third largest economy behind the U.S. and China, Japan’s economic growth reached 2.4% during January, February and March 2015. This figure was well above analysts’ expectations for the period in question. As one of the world’s leading consumers of crude oil, the expansion in Japan’s economy will significantly boost overall demand for Crude oil and raise prices further.
Further geopolitical uncertainty was reported in Yemen where ongoing attacks by Saudi Arabian forces continue to do battle against the Houthi rebels backed by Iran. Yemen may not produce any substantial oil quantities, but it is within close proximity to some of the world’s busiest shipping routes. Also in the Pacific, Australian consumer confidence increased which bolstered prospects for increased demand for oil.
Fluctuating Fortunes of Brent Crude and WTI Crude Oil
In June 2014, the price of Crude oil was flying high at $110 per barrel. By January 2015, the price of Crude oil slipped to under $44 per barrel. During May, Australian consumer sentiment spiked after the government released a budget with tax breaks available to small businesses. Further, the Reserve Bank of Australia fixed interest rates at a level of just 2%. With Japan’s economic growth and the positive news coming out of Australia, Brent crude oil rose to $64.78 per barrel and WTI Crude oil rose to $58.56 per barrel.
Binary option platform analysts have seen strong demand for oil commodities in the form of call options of late. Shifting expectations as a result of invigorated economic performance has led to growth in demand for Crude oil. There was plenty more optimism for the continued rally in oil markets when the Iranian deputy oil minister made statements to the effect that the price of oil would rise to over $80 per barrel by the end of 2016.
Increased Oil Demand during Summer Months
Commodities analysts at leading petrochemical companies believe that the supply of U.S. oil is sustainable even at the current price levels. It is even believed that a price of $60 per barrel will be sufficient to keep U.S. shale oil wells producing at current levels. It should be remembered that the United States does not export oil; therefore the country cannot be considered a swing producer. Now that summer is well on its way, domestic consumption of crude oil will increase in the Middle East. This will add further to the rising price and falling inventory level of crude oil stocks.
Other commodities faced mounting pressures, especially industrial metals and precious metals. Gold fell to $1,206.70 per troy ounce, copper dropped to $2.84 per pound and silver dropped to $17.07 per ounce. On the NYMEX, heating oil dropped to $1.929 per gallon, natural gas fell to $2.948 per 1000 ft³ and wholesale gas fell to $1.995 per gallon.