Oil Price Surge Above $70 As Dollar Continues To Fall

Javier Howell
January 29, 2018

Brent spreads regularly cycle between contango and backwardation as the global oil market alternates between periods of over- and under-supply.

"Historically, Shell has an unparalleled track record for paying its dividend through thick and thin, having maintained or increased it every year since the end of the Second World War".

That price structure also benefits investors, who profit a bit each month when they roll their positions forward.

Things, for sure, are working in Opec's favour for now.

Russian Federation and the Organization of Petroleum Exporting Countries continue to hold global supply in check with their agreement to scale back production, but oil demand in the United States and worldwide also is continuing to grow. Until recently, spreads in United States crude (WTI) lagged behind Brent, reflecting the high levels of stocks around the WTI contract's delivery point at Cushing in Oklahoma.

Bloomberg: US oil climbs toward Brent on weaker dollar and stockpile drop

Brent for March settlement added 15c to $70.57 a barrel on the London-based ICE Futures Europe exchange after falling 11c on Thursday.

The EIA report "was decent enough in terms of the oil drawdowns at the key points in the Gulf Coast and Cushing", the delivery hub for WTI, said John Kilduff, partner at energy hedge fund Again Capital. But the group has, just as often, defied its critics this time too.

OPEC and its allies insist more needs to be done to reduce global oil inventories but the market already shows unmistakeable signs of becoming very tight. Only Russia produces more, averaging 10.98 million bpd in 2017. That could keep demand strong even as prices rise, analysts said. That reflects a structural shift in oil market fundamentals, which has prompted several major investment banks to significantly raise their 2018 crude price forecasts in recent weeks.

There are, of course, gainers and losers when it comes to consistently lower oil prices. Oil prices tumbled Thursday afternoon after President Donald Trump expressed his preference for a stronger dollar, sending the dollar up in late trading.

U.S. Treasury Secretary Steven Mnuchin had said yesterday during the Davos summit that "a weaker dollar is good for trade", boosting the price of oil and other dollar-denominated commodities.

Other reports by Insurance News

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