Crude prices struggled to move higher this week but wound up trading at $50.85. Daily fluctuations are observed in the graphic below. Crude peaked mid-week and retreated to the $50 range by Friday.
As seen in the graph above, there is a push effect which is likely triggered by optimism over what some analysts see as a tightening Asian market.
From sharp cuts to Chinese oil production and falling inventories of refined products, signs are mounting that Asia's oil markets are slowly returning to balance. A shortfall, however, is not expected until 1017.
The IEA expects the tightening process to begin in the second half of 2016, but it will be a "slow and painful" process with declining global demand and greater OPEC supplies coming online.
- A lack of booming growth in emerging markets that dampen a need for greater oil imports.
- A global slowdown in economic growth with increasing debt burdens.
- Incentives for U.S. Frackers to profit from $50 crude.
Where is the price of oil going? In my opinion, oil is currently trapped in an oil price vise at the $50 level. This is a freeze point, a supply demand balance where price vacillates in a narrow range.
For investors, push and pull variables are in play and must be analyzed to determine which has the stronger tug or if they remain in balance.
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