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Currency Analyst since 2010

Which factors influence oil prices?

Oil prices rose for the fifth month in a row. Brent recovered losses it made on the Brexit referendum and rose above resistance line connecting June highs in the $50.40 area.

Bullish factors for oil are: a decline in the US oil inventories (American stockpiles fell by 4.1 million barrels in the most recent week), Venezuela's falling oil production and strong US gasoline demand.

Bearish factors for oil include a ceasefire in Nigeria and receding wildfires in Canada, which should increase supply of the commodity. Nigerian production has already recovered by 200K-300K barrels per day since the middle of June. In addition, although the market players feared the looming strike by Norway's oil sector, even if it happens, the output of the North Sea's biggest producer will fall by only 7%. Moreover, the prospect of Brexit should continue adding uncertainty and limit oil price gains. Note that although most economists forecast higher oil prices in the second half of 2016, the biggest risk to this bullish for oil scenario is weak economic data from the US, Europe and China.

Resistance is still provided by June 9 high at $52.85. Support is at $50.00, $48.50 and $47.00. in the short term we may see more consolidation of the commodity. 

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