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This Oil Price Rally Has Reached Its Limit
Posted by BFP Staff on Aug 2, 2017 at 08:05 AM
The OPEC cuts continue to have an effect.
By Nick Cunningham of Oilprice.com
Last week, crude oil rallied the most so far this year, gaining more than 8 percent, or $4 per barrel. Oil traders are much more optimistic than they were just a month ago, and the market is on the upswing. However, the rally could run out of steam in the not-so-distant future, a familiar result for those paying attention to the oil market in the last few years.
There are several significant reasons why oil prices have regained most of the lost ground since the end of May. First, the OPEC cuts continue to have an effect. We can quibble over the degree to which OPEC members are complying with their promised cuts, but the cartel is taking more than 1 million barrels per day off the market, with a small group of non-OPEC countries contributing about half as much in reductions. As time goes on, that will help narrow the imbalances.
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