Riding High: Oil Prices Rally for Fourth Consecutive Week
July 21, 2023 – The oil market has been making significant strides, marking four consecutive weeks of gains for both U.S. and international crude oil benchmarks. This positive wave is largely predicted on an anticipated shrink in oil availability during the second half of 2023.
Throughout July, there has been a significant price increase in both key types of oil. West Texas Intermediate (WTI), the standard for U.S. oil prices, has seen a leap of over 9%. At the same time, Brent crude, used as an international benchmark price, recorded an increase of over 8%. These substantial increases have gone a long way in offsetting losses that accumulated earlier in the year.
However, it’s not all smooth sailing. Several lurking concerns could potentially disrupt this upward trend. There’s a widespread worry that if the world’s central banks raise their interest rates, it could lead to a hard-hitting economic slump. The slower-than-expected bounce back of China’s economy, post the implementation of severe COVID-19 restrictions, is another source of concern that could unsettle the market. Learn how our expert traders are navigating these potential economic hurdles with a free, all-access, 7-day guest pass.
This perspective is further reinforced by Ricardo Evangelista, a senior analyst at ActivTrades. He highlights the issue that China, as the world’s top importer of crude oil, is not recovering its economic growth as quickly as we saw before the pandemic. This sluggish growth could have a ripple effect on the global demand for oil moving forward.
On a brighter note, there’s been a recent announcement that has piqued the interest of oil traders worldwide. The Chinese government’s declaration to initiate measures to stimulate their economy could have a positive impact on the demand for oil. If these measures are effective, it could recalibrate market expectations, leading to an increase in projected oil demand and, consequently, a rise in oil prices.
This escalation in oil prices is accompanied by a growing sentiment among market watchers. Many believe that the central banks around the globe are nearing the end of their interest rate hiking phases. Coupled with potential signs of economic recovery and decreased oil output from two of the world’s leading oil-producing countries, Saudi Arabia and Russia, this could lead to a reduction in the amount of oil available in the market during the second half of this year.
In the near term, market watchers have set their sights on the upcoming U.S. Federal Reserve meeting, scheduled for next week. It’s widely anticipated that there will be another slight hike in interest rates. All eyes will be on Fed Chairman Jerome Powell, eager to dissect his speech for any indications of whether this will be the last interest rate increase for this year, or if more increases are expected down the line.
While oil prices are soaring, natural gas futures have experienced their own success with a weekly increase of 6.9%. Despite this, they have not been able to shake off the month-to-date loss of 3%, and they are still facing a significant 39% decrease year-to-date. This clearly shows the volatility of the energy market and the challenges it faces moving forward.