Bulls in the oil market or bears – which of the strategies will be correct?
Brent oil, produced in the North Sea, set a record for the duration of its growth. This is not surprising, since in December 2018 the price per barrel was 50 dollars. Now, its value has risen to 60, and some analysts are already dreaming of 70. However, there are few investors hoping for a further rise in the price of black gold. Hedge funds have increased long positions. However, this is mainly due to closed short. Does not add optimism to the fall in crude oil prices from $ 86 in October 2018.
Reducing the price of the brand Brent to $ 50 negatively perceived in the United States. Hydrocarbons produced by the development of American shale, objectively worse and cheaper. At a cost of high-quality North Sea oil of $ 50 for fuel of the American spill, it could give only 30. But this price is devastating for US industrialists with the high cost of equipment and personnel.
But the Americans played into the hands of the OPEC + countries, as well as Russia and Saudi Arabia. Everyone wants to produce less, but to earn more on the barrel.
Therefore, supply in the market has decreased, and the price has risen to $ 60 per barrel (on some days – 62). It happened differently with Iran: the country really needs money and is far from the fact that the Islamic Republic would have joined the agreement to reduce black gold production. But Iran was crushed by sanctions. Oil exports from this country decreased by 60% to a million barrels per day. Iran helped India, in dire need of hydrocarbons and buying them for rupees.
The growth of the price per barrel of Brent was influenced by several other factors. Namely: cheaper commodities in the dollar. Which is a consequence of the weakening of the US currency and the stabilization of stock markets.
Bulls in the market: fear and disbelief
Bulls are cautious after the events of December 2018. A barrel of $ 50 discouraged a long time the desire to play for a raise. The situation is especially acute in the temporary
Perspective: during the year, investors suffered losses, while oil itself fell by 40% in 4 quarters. Many look back at the games of the American shales. With the low cost of a barrel of Brent, it is unprofitable for them to do something. But as soon as hydrocarbons from the North Sea overcome the 65% value bar, America comes to life and increases production. In general, it is more difficult than ever for long-term investors: the market is too unpredictable.
Reducing the supply of hydrocarbons leads to an increase in their prices and vice versa. This strategy is tested. Bulls could sell more expiring contracts. And buy cheaper. The difference makes a profit. But when the shales intervene, filling the shortage, this factor must be taken into account.
Most agree that in 2019 there is no point in waiting for the price to rise above $ 70 per barrel. Bulls, of course, can enter into profits from their usual trading patterns. But this year may give them a lot of surprises.
