The price of oil is screaming higher.
But very few are paying attention.
And it’s most likely crude is only headed higher from here. Investors should be aware.
Oil prices touched $74 per barrel yesterday for the first time since 2014, increasing a hefty 13% for the week.
The rally this week is due to a number of factors:
- Falling U.S. crude inventories
- OPEC production concerns
- U.S. sanctions on importers of crude from Iran
- A power outage in Canada, which is disrupting oil imports to the U.S.
Falling U.S. Inventories
The Energy Information Administration released data this week showing U.S. crude inventories falling 9.89 million barrels.
This was the sharpest one-week decline since September 2016. Analysts had predicted a much smaller drop of 2.6 million barrels.
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OPEC Production Concerns
OPEC members met last Friday to discuss ways to boost production. The head of OPEC said the cartel will increase output to the maximum allowed under the terms of a production agreement set in 2016.
However, OPEC production has fallen in recent months due to factors including outages in Venezuela. And with demand on the rise, investors are betting on a potential supply crunch.
U.S. Sanctions Against Iranian Oil Importers
Earlier this week, President Trump demanded all countries halt crude imports from Iran… or face sanctions from the U.S.
The president threatened to levy sanctions on any nation that refused to cut off all Iranian crude imports by November as part of his broader push to further isolate the Arab nation both politically and economically.
Canadian Power Outage
A power outage at one of Canada’s largest oil sands facilities could lead to a shortage in North American crude supplies. Last week, the power went out at Syncrude Canada’s oil sands facility near Fort McMurray and is expected to be offline through July.
Canada is the fourth-largest oil producer in the world and could lose as much as 10% of its total production as a result of the outage.
The price of crude is still likely to continue heading higher as a result of all this and more. But at $74 per barrel, people aren’t paying too close attention. And that makes it still a great time to invest.
I suspect that once oil prices begin to approach the psychological $100 level, more media outlets will begin reporting on rising oil prices. That will likely lead to increased investor speculation and push crude prices even higher.
Oil’s trend is looking very bullish right now. Investors should take note.
Until next time,
Luke Burgess
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
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