Global Trade and Demand for Oil

Andamento del mercato - 07/03/2018

Accelerating oil demand, look to the seas and skies


Crude oil and Brent futures are among the most traded commodities in the markets. They are very active in the market and not only for investors, but everyday people also experience the change in oil prices in their everyday life. News flows continuously as the major forces affecting oil prices, the laws of demand and supply, are never constant.

Oil prices affect the price of many other assets including currencies, stocks, bonds, and even other commodities. This is because crude oil remains a major source of energy for the world.

The surge of oil consumption took by surprise all analysts last year, which was one of the major factors that helped crude’s recovery, managing to reach a three-year top in January of 2018.

This year, demand for oil can possibly turn out to be even higher than 2017’s levels, taking into consideration that global economic activity is picking up. At least that is what data from industries like aviation, shipping and trucking suggest.

The growth rate of demand for oil has been at the highest level for the last decade. The International Energy Agency in Paris (IEA), the U.S. Energy Information Administration (EIA), and the Organization of Petroleum Exporting Countries (OPEC) have all reported an expansion of consumption by a minimum 1.4 million barrels a day every year for the period of 2015 to 2018.

The International Monetary Fund’s most recent estimates for world trade growth suggest it will exceed 4% for three consecutive years until 2019, the same way as it was achieved when oil prices were surging to all-time records a decade ago.

The increase of the global economic growth drives consumption higher as planes, trucks and ships move more goods around the world. The growth in oil prices is also driven by consumers in emerging markets as their economies develop and demand increases at a faster pace.

Supply agreements from oil producers have been critical factors boosting the oil prices. Last November, OPEC and non-OPEC producers led by Russia agreed to extend oil output cuts until the end of 2018 and they signaled a possible early exit from the deal in the case the market overheats.

Though crude prices could now be at risk from the protectionist talk coming from Washington. The U.S. President Donald Trump can derail the prices of several commodity assets including the crude oil.

Among the downside factors is also the rise of US oil production which tops 10 million barrels a day for the first time since 1970. The U.S. is now the world's second largest oil producer. Russia is the largest, with about 11 million barrels a day.

News, demand and supply vary almost every day causing the crude oil prices to flow and move from day to day. This presents many good trading opportunities on oil futures for intra-day traders, longer-term traders or even investors and governments.

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