How to trade oil in June

The past year was marked by several phases of decline in the oil industry. This was primarily due to pandemic, lockdown, and overproduction with reduced demand. Spring 2020 was a critical month for them - they fell by half, reaching as low as $30 per barrel. But the lockdown and severe restrictions are a thing of the past, and vaccination rates are rising globally. This is helping fuel demand, which has allowed benchmark quotes to almost completely recover the decline due to the pandemic.

According to experts, the rapid growth of oil quotations confirms the recovery of demand in the future amid economic recovery.

According to experts, the market has now reached a certain balance between supply and demand. OPEC+ has decided to gradually increase oil production, which takes into account the seasonal growth in demand, as well as the impact of the coronavirus epidemic in India on the global situation. There are fears that demand will recover faster than long-term supplies, which is associated with a decline in investment in oil production by international companies due to the environmental concerns. At the moment, oil withdrawn earlier as a result of lower demand is returning to the market. This raises the question: do companies have spare capacity?

In addition, the fuel reserves that had been accumulated during the pandemic had practically run out by the end of April. No more than 20% of such "surplus" remained on the balance sheet of developed countries. In July last year, the volume of reserves amounted to 249 million barrels, and in February this figure fell to 57 million barrels, according to the International Energy Agency (IEA). This situation was to some extent a consequence of OPEC+ decisions.

The hurricane season will soon begin in the Gulf of Mexico, which could support the oil market. There are approximately 40% of US oil production facilities located on the Gulf Coast. Disruptions in their work may provoke a temporary deficit in the US oil products market.

The current rise was fueled by a statement from the U.S. National Hurricane Tracking Center, which stated that a natural phenomenon should be expected to form over the western Gulf with a 60% probability. This is an important statement given the number of oil facilities located in the region: 45% refineries and 51% natural gas processing facilities.

In addition, the rise in the benchmark quotes was influenced by the announcement that U.S. motorists will be filling up their cars more than once this week, given the upcoming Memorial Day holiday weekend, which will last three days.

According to an earlier statement by the speaker of the Iranian parliament, the three months during which the agreement between Tehran and the UN implied oversight by the latter have expired. Now the images of several Iranian nuclear facilities are not subject to control.

European diplomats warned last week that by refusing to extend the agreement, Tehran could jeopardize the 2015 Iran-US nuclear deal negotiations. They are expected to resume shortly in Vienna.

According to Bloomberg, Iran would prefer to extend the agreement while buying time to begin reviving the JCPOA.

All this time, the Biden administration has looked the other way as Iran has been shipping "leftist" oil and has been slow to apply the sanctions imposed by Trump. At this point, it is important for this Islamic Republic to fully restore international banking mechanisms to remove obstacles to commodity transactions.

Analysts believe that additional Iranian barrels will negatively impact the market given the other threats.

The oil cartel will hold its next meeting in early June. According to the previously announced plans, it plans to gradually increase production. Just at the upcoming meeting, the cartel will assess the situation on the market and will decide whether or not to take this step.

Given the improving global economic environment and growing demand, it is possible that OPEC+ will decide to adjust the current arrangements.

It is unlikely that oil producers will reduce production volumes, but growth is quite possible. Additional barrels of oil on the market should "cool" it down and cause prices to fall.

The oil bulls are supported by general market optimism. Investors are paying close attention to inflation figures to determine whether prices will rise temporarily or in the long term. Securities of oil and materials companies are gaining the most popularity as they can pass on higher costs to consumers. Securities of companies in the IT sector are being left behind.

If the Fed will be convincing enough in its statements regarding the long-term stimulus policy, the euphoria in the market will continue. In this case will update its minimum values for several months, which will support commodity quotations.

Чтобы приступить к покупке нефти, достаточно зарегистрироваться на сайте надежного брокера. Например, AMarkets является участником The Financial Commission. Помните, что нефть — это рисковый актив, и торговать им нужно соблюдая осторожность.