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Jan von Gerich, Analyst at Nordea Markets, notes that oil prices have been on an uptrend for most of the past year, and the rise in prices seems to have only accelerated in the past one and a half months as Brent reached the USD 80 per barrel level last week, the highest since 2014.

Key Quotes

“The rise in prices has been supported by a multitude of factors

  • Strong global economy has supported oil demand growth
  • An agreement by OPEC and several non-OPEC countries on limiting production, in effect since late 2016
  • Oil inventories have fallen from high to more normal levels
  • Actual or expected supply disruptions in Iran and Venezuela, among others”

“The momentum in the oil price remains strong, and prices are likely to continue their march higher in the coming months. The geopolitical tensions are unlikely to fade quickly. For example, the consequences of the Iranian situation remain very uncertain. To recap, the US is reimposing heavy sanctions on the country, including doing business in Iran and trading with the country.”

“While some were calling for limited changes to the oil markets as a consequence of the US withdrawal from the Iran deal, as European countries have said to keep the nuclear deal alive, the warning by the French Total of a pull-out from Iran illustrates that effects will go beyond US companies.”

“Higher prices are also supported by seasonality. The oil price often rises during the summer, especially in the August holiday season in the US, as gasoline demand increases.”

“As a result, oil prices could easily climb to somewhere around USD 90 per barrel by the autumn, but reaching the USD 100 level would probably require bigger supply disruptions and further strong growth in the global economy.”