At crossroads: oil prices are waiting

At the moment, the price of black gold reached multi-month highs but can not decide on the future direction. According to some analysts, the global market is on the verge of collapse.

Thanks to the efforts of the world central banks, financial assets worldwide have risen in price. This trend has affected oil futures, which are also a financial asset. However, the high probability of a slowdown in the global economy makes its own adjustments to a positive picture. In the case of such a scenario, we should expect a collapse in oil prices since a slowing economy consumes less oil and the rise in prices of black gold has negatively affected economic growth.

Experts find it difficult to answer what factors can trigger this process. Due to the general uncertainty, the price of black gold is also in a "suspended" state. It is not known where the pendulum will swing if either in the direction of growth or decline.

There is a shortage of heavy raw materials in the world oil market, which is mined in Venezuela and Iran. The reason for this is the US sanctions against these countries, as well as the reduction in production of OPEC + led by Saudi Arabia. The deficient high-sulfur oil, whose indicative grade is Dubai, has been trading at its lowest level since December 2018 in relation to the North Sea Brent. At the same time, the shale boom recorded in the USA provides impressive volumes of light low-sulfur oil supply.

Dubai's cost relative to Brent contributed to the discrepancy in the profitability of oil refining into gasoline and fuel oil, noted in the news agency, Bloomberg. Typically, more fuel oil is produced from sulfur oil, which is used as a marine fuel. At the moment, the margin is in the red. At the same time, the margin of gasoline production increased to $7 in March 2019, whereas it was at about $2 a barrel at the end of January of this year.

Experts pay attention to the fact that the distillation of low-sulfur oil and the benchmark for which is Brent, usually gives more automotive fuel than varieties like Dubai. Due to this, the price of Brent was higher than the cost of the Middle Eastern brand, analysts emphasized.


The material has been provided by InstaForex Company -