There has been massive confusion in the energy field from the very begging of the last year as the price of oil was tumbling down in the global market breaking major support levels. However, the price of oil found some solid support in the global market after OPEC imposed oil cap production to limit the oversupply problem in the global market. Most of the leading investor made a decent profit by buying the oil at that time and rode a decent bullish rally in the global market. However, things are getting a little bit cloudy in the global market as many leading oil producing countries are not adhering to the rules of OPEC at the current movement. Some of the leading oil investors are now in fear since if such problem persists in the global economy soon the oil bulls will be countered by the bears in the market due to the oversupply problem in the global economy.But the optimistic traders are hoping that the OPEC will take the further strict initiative to bring stability in the energy sectors in the upcoming days and if it truly happens then we will see another bullish rally in the oil market.
Decent rise in oil price: There has been a decent gain in the oil price in the very beginning of the week but most of the professional investors are still in doubt about this current gain as the number of oil rigs in the U.S economy has increased to a great extent over the one year period. If all the oil rigs in the U.S economy becomes active in the production of oil than there is strong chance that the oversupply problem will again reach its peak, pushing the price down in the global market. The Brent gained 23 cents in the global market and traded at $56.04 a barrel and on the other hand, the West Texas Intermediate Crude gained near about 19 percent in the global market and traded at $53.50 a barrel. According to the leading economist if the price of oil maintain the support level of $ 50 per barrel than here is strong chance that we will see the price at 60$ per barrel which will ease the oil investors to great extent. According to Jeffrey Hally, the price of oil is now trading above critical support level and if this support level holds then you will see another decent bullish rally in the price oil which will clearly demonstrate the ongoing stability in the energy field.
Sentiment of leading oil producing countries: Most of the leading oil producing countries in the world have appreciated OPEC decision and they are actively taking participation in the oil cap production. Kuwait has already stated that they have already cut their current production of oil more than they promised and thus have a huge positive impact in the bullish rally in the oil price. On the other hand, Saudi Arabia has also limited their current production rate and helping to bring stabilization in the energy sectors. However, the U.S energy companies are adding more oil rigs despite the strict oil cap production by OPEC. For the first consecutive week, more oil rigs have been placed in the U.S economy which has created a fear in the mind of oil investors in the global economy. If the active oil rigs in U.S produce at its full than production rate will be increased to 405,000 barrels per day which will clearly bring back the bears in the oil market. However, U.S government has stated that they are going to limit their current production oil to maintain the stability in the energy field but the active number of oil rigs are a great concern for the conservative oil investors.
OPEC action to bring stability: The first drastic action was taken by the OPEC in the last year which gave a strong ground to the price and such a drastic action was not seen since 2008.Most of the leading oil producing countries are adhering to the OPEC rule and Russia has already stated that they would cut their production of oil to 1.8 million barrels per day to bring stability in the energy field by the first quarter of the year 2017.There has been also decent drop in the export of oil in Saudi Arabia and this has also given a hope into the oil investors that the price will rally higher in the global market. But now the priority concern is the active oil rigs in U.S. Over the period of one year the number of active oil rigs in the U.S government has been increased to 566 which clearly impose a threat the oil industry. On the contrary, Iraq is also producing more than 4 million barrels per day which clearly unstable the energy sectors.
Summary: The price of oil is trading above important support level in the global industry and most of the leading oil producing countries are now adhering to OPEC rules. Some of the leading oil producing countries like Saudi Arabia and Kuwait has already cut more than they promised to bring stability in the energy sectors. But countries like Iraq is still producing oil in mass scale which fuels the oversupply problem of oil in the global market. On the contrary, the number of active oil rigs in the U.S is also a concerning issue since it can create an extreme level of oversupply problem in the global market causing sharp fall in the oil price.