Crude Oil Price Forecast: $70 Cap Holding

OILMONSTER.COM- Oil again attempted to break through and remain above $70 per barrel this week but failed to maintain that price when the International Energy Agency (IEA) said on Thursday that global oil supplies are at a record high even though oil exports from Iran and Venezuela are falling.

Oil Tug-of-War Continues

For weeks, the oil market has been caught between two narratives in what some analysts are calling a tale of two markets. The first and slightly preferred story is that oil prices could rocket to over $100 per barrel after U.S. sanctions against Iran's oil exports come into effect in November. The other is that an ongoing trade dispute between the U.S. and China could escalate and drag down the global economy.

The market prefers the first story over the second one as the evidence grows that Iran's oil sector is starting to buckle. Exports of crude are down as countries like South Korea stop imports of Iranian crude entirely ahead of the November deadline. Additionally, the Trump administration has broadened the list of sanctions to target Iran's condensate and other refined oil product exports as well.

Pressure on Iran, along with a lack of spare global oil production capacity, prompted HSBC Holdings plc (HSBC) – a global investment bank – to increase its Brent oil forecast last week to $100 per barrel, and the bank expects prices to remain at that level through 2020. Brent closed Friday at $78.11 per barrel and is up 16.8% in 2018.

Oil made another attempt to break through the $70-per-barrel price level on Wednesday last week but was unable to remain there. A report from the IEA on Thursday saying that global oil supplies hit a record high in August despite falling output from Iran and Venezuela pushed prices firmly downward on the day.

Courtesy: www.investopedia.com