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Wednesday, 20 June 11:12 (GMT -05:00)



Stock and commodities markets

Crude Oil Goes Above $80/b, Morgan Stanley Improves Oil Forecast


On Thursday, May 17th, Brent oil exceeded $80/b for the first time in 3,5 years. The last time the price reached this level was on November 25th, 2014.

In particular, the ICE Brent oil futures (London) for July delivery reached $80,18/b. This was a 0,9% gain over the last 24 hours, 8% since early May, and 19,5% since January 1st, 2018.
 
At this point, international experts name a number of reasons pushing oil prices higher. For starters, this is about shrining U.S. oil inventories (minus 1,4 barrels of crude oil and 3,8 million barrels of gasoline for the past week alone) as well as the sanctions the USA is going to impose on Iran in the near future after the former quit the nuclear deal. Another reason is the fact that the oil production in Venezuela has been going down for quite a while. At the same time, hedge funds have been actively betting on higher oil prices amid decreasing oil inventories in OECD states (all the way down to the lows of 2015). It seems that the decline in the global demand for crude oil predicted by the IEA coupled with higher oil production by non-OPEC producers has failed so far to convince international investors that there will be no oil deficit in the near future.
 

Still, chances are the market panic vanishes over time. Experts say there is a huge gap between paper oil and physical oil (oil futures and actual crude oil). To be more specific, there is a major imbalance in favor of paper oil. Still, according to a Reuters source, we may well see the market cleaning up shortly.

Still, Morgan Stanley and Bank of America anticipate higher oil prices over the long term. They
havealreadyimprovedtheir 2020 oilforecastsfrom 65 dollarsperbarrelallthewayupto 90 dollarsperbarrel. The truth is, they have raised the bar due to some tech factors. The thing is, there will be new fuel standards introduced for sea vessels in 2020 amid an increased demand for diesel and aviation fuel while oil refineries cannot handle the increased demand of distillates.

 

 

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