Crude oil prices are not linked to production or inventory. This is the seventh week in a row that oil prices have moved higher, and if you examined the fundamentals, you would think that production has fallen or inventories have declined. You would be wrong with that logic.
- OPEC output is at the highest levels in four years at over 31 MBPD.
- IRAQ exports are the highest in 30 years at over 3 MBPD.
- US crude inventories have increased for the 16th week in a row.
- World surplus is over 1.1 MBPD.
There is not a good explanation for the higher prices except for geopolitical risks. This reason is as good as any right now, but there seems to be a true disconnect between the rise in oil and the fundamentals. It does not seem there are strong reasons for further upward momentum in oil. The only reasons would be surprise growth, surprise risk, or a cutback in production. The operative word is surprise. No surprise and the price increase will stall.
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