An array of natural disasters in the US, which cut down refinery capacity, coupled with strong demand in both Asia and more surprisingly, industrial nations, have helped to support oil prices.
We need to look further than OPEC to determine oil’s direction.
Depleting diesel inventories over the summer, where traditionally, refineries would produce excess inventories in preparation for the chilly months of winter. Given the decreased inventories, a cooler than usual winter could mean an uptick in prices.
With diesel inventories low and demand high, refiners are enjoying larger profit margins, which has spurred an overall lift in oil markets. The recent rise in oil prices have spurred American producers to secure sales at current highs, indicating that traders are predicting oil prices will climb further in 2018.
Additionally, we’re seeing strong recovery and stability among most economies around the world, which will boost demand for oil beyond the ten-year average.
Brewing tensions in the Middle East are adding to the bullish sentiment as Turkey threatens to turn off the pipeline in retaliation to the Kurdish referendum. Moreover, North Korean and US strained relationship may be bullish for oil, as the two nations engage in a war of words.
However, if OPEC do not extend production cuts beyond the deadline of March 2018 the bullish sentiment will not last as stockpiles begin to creep up.
We’re experiencing a see-saw reaction as investors mull over taking profits at the high and delving back onto long positions when they find the commodity heading toward support levels.
Crude oil inventories will be released at (15:30 GMT+1). It is expected that stockpiles are at 2.9M compared with 4.6M the previous week.