Oil price settles higher as supply tightens

There has been massive chaos in the oil industry from the last year since the price of oil was tumbling in the global economy. The drastic downfall in the energy sectors was due to the fact of an oversupply of oil in the global economy. However, in the last year, the price of oil found some solid support from OPEC as they stated the limit the production of oil in the global economy to bring stability in the energy sectors. Such a drastic action was not taken by the OPEC since 2008 and most of the leading oil investors were little bit relaxed after that event. After the OPEC decision, most of the oil bulls made a decent profit in the global economy by riding the bullish momentum in the market. However, in the last month, the price of oil again started to fall in the global economy as most of the leading oil producing countries showed different attitude to the OPEC decision. The last month downfall in the price of oil after hitting a critical high at 58.41 in the global market created a line tension into the oil bulls in the global economy.

Tight supply from the oil industry: In the last Friday, the price oil rallied higher in the global economy due to recent policy in the supply of oil in the production line. According to the International Energy Agency in the global market, the recent supply of oil is currently falling down in the global market. Most of the leading economist are thinking that the price of oil might find a strong bullish momentum in the global economy as the supply is most likely to be tightened in the near future. There has been a decent gain of 1.62 percent in the price of crude on the New York Mercantile Exchange and it traded at $53.86 a barrel. On the other hand, the Brent gained near about 1.92 percent in the global economy in the London Intercontinental Exchange and traded at $55.70 a barrel. Most of the leading oil investors are considering this gain as a positive sign in the oil industry. Since the last week close week a bullish tone most of the economist are thinking that the energy field will exhibit strong bullish tone in early days of the next trading week. However, the conservative traders are still overly cautious about buying the oil at the current moment.

Global scale scenario: There has been a massive chaos in the global due to the recent energy crisis. But things have settled down in the global economy to a great extent after OPEC put the initial production cap in the oil producing countries. In the last month, there has been a decent drop in the global scale production of oil. According to the international Energy Agency, there has been near about 1.8 million barrel drops per day in the production queue. Most of the leading investors are now in relief since the price if oil is facing some bullish momentum in the global market with the backup strong fundamental news release. However, some of the conservative investors are still overly cautious about the oil price since OPEC has been trying for the last two years to limit the over supply problem in the global economy. Russia has cut their production of oil by 1.8 million barrels per day. On the contrary Saudi Arabia has also capped their production and actively participating in bringing stability in the energy sectors. If things continue like this then we might see a strong rally in the price oil in near future. However, some other concerning issues like active oil rigs and USA and Iraq current rate of production needs to be taken off in order to stabilize the energy sector.

Active oil rigs: There has been a massive increase in the number of oil rigs in the U.S economy in the last year. In the very beginning of the last year, the number of oil rigs in the U.S economy was only 12 which has now reached 591.Such a drastic rise in the number of active oil rigs in the US economy has created massive fear into the mind of oil investors since active production from those oil rigs will create another sharp fall in the price of oil. If the majority of the oil rigs starts drilling than the oversupply will again reach its peak in the market and the price will tumble hard in the global economy. On the other had Iraq is also producing a massive amount of oil creating an imbalance in the energy sectors. However, Iraq is most likely to limit their current production of oil to a certain extensive Iraq and U.S oil rigs don’t create another major oversupply problem in the global economy than the oil bulls have a long bullish ride in the near future.

Summary: The price of oil has found a solid ground in the global market as there has been a cut of 1.8 million barrels per day from the global production line. However, some of the investors are cautious about the number of active oil rigs in the USA but the U.S government has stated that they will not create an imbalance in the energy sectors. If things continue like this then there is strong chance that the price of oil will rally higher in the global market. Considering all the parameters the oil market remains bullish for the upcoming week.