Last year, the price of crude oil
reached a multi-high level of $87. Since then, the price of Brent dropped
sharply after Donald Trump gave exceptions to Iran oil. This was an unexpected
move, which saw the price drop to a low of $49.50. In response to this, OPEC
members met in Vienna for their annual general meeting, where they decided to
slash oil production. By doing this, they wanted to constraint the production,
with the goal of raising the prices. It has worked. This year, the price of
crude oil has jumped by more than 30%.
The surge in price this year has
been because of OPEC decision to cut production and the sanctions the US has
put in place on Venezuela, which has the biggest oil reserves in the world. In
addition, investors have ignored the slowing global growth. This week,
Christine Lagarde, is expected to slash global economic forecast for the second
time this year.
In addition, production from the
US has been sluggish. According to the EIA, the country produces more than 12
million barrels of crude oil every day, making it the biggest producer in the
world. It is followed by Saudi Arabia and Russia.
Over the weekend, a conflict in
Libya escalated, leading many to fear that there will be disruptions in
production. Libya has been a dangerous place since the killing of Muammar
Gadaffi in 2011. Over4 the weekend, Khalifa Haftar, a military strongman who
controls the country started an offensive against UN-backed government in
Tripoli. While the current fighting is away from the main oil fields, the fears
are that it could continue. 21 people were confirmed dead. In response, US
secretary of the state has called for an immediate end of fighting and asked
for talks to start. This is unlikely because the country has been polarized
after the murder of Gadaffi.
In the annual chart below, the
price of crude oil has reached a high of $70. This price is above the 50%
Fibonacci Retracement level and is above the upper line of the Bollinger Bands.
There is therefore a likelihood that the upward momentum may continue until the
pair tests the previous highs of almost $90.
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