Brent oil (OIL symbol) prices have not been in the same style of a wild rally as US indices or precious metals but have been moving consistently upwards for a while. Today OIL gains over 1% to test multi-month highs and there are at least 3 factors behind this move:
- US dollar is under a renewed pressure under a speech from J Powell from last Thursday. Since OIL is traded in USD, weaker currency helps price gains.
- Less drilling = smaller supply. The number of drilling rigs on the North Sea declined from 18 in 2018 to 11 currently and 3 of those are “cold-stacked” – unable to return to work without a significant expense. This means that it will take more price pressure to restore drilling capacity.
- Investors are also betting on continued declines in US oil inventories (inventory data will be released on Tuesday evening from the API and Wednesday 3:30 BST from the DOE)
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