Tough times ahead: oil to face pressure

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At the end of the trading week, oil prices fell noticeably. Many analysts voiced concerns about the future prospects of the oil market after such a considerable decline.

On the trading floor in London, Brent futures for April were lower by 1.6%, or $1.02, moving down to the level of $62.91 per barrel.

On the electronic trading platform in New York, WTI futures for March sank even more by 2.1%, or $1.28. They are trading at $59.24 per barrel. WTF futures for April are now trading more actively, but even their value has significantly decreased. The drop was 2.1%, or $1.27, and the price amounted to $59.26 per barrel.

When summing up the results of the entire trading week, it becomes clear that even the most popular futures for WTI crude oil were below their previous level by 0.4%. However, Brent futures contract has not yet fallen to such a negative level. On the contrary, it showed a weekly growth of 0.8%. The most pleasant thing in this situation is that Brent has been soaring for the fifth week in a row. Additionally, Brent oil has been able to reach its highest level in the last thirteen months.

The oil market is primarily under pressure due to the events in America. Severe frosts caused a reduction in oil production by about 4 million barrels per day. Reportedly, the oil production in Texas is almost completely restored after severe frosts, which forced producers to temporarily shut down the production. The problem was related to the electricity supply, which had been resumed from the local grid, as well as through the use of generators. Therefore, the shale deposits have started working again. The pressure on the market has increased again. The amount of supply will go up again, while demand is not too volatile yet.

Nevertheless, experts try to calm down investors, arguing that the full recovery of the fields in Texas will take quite a long period of time, but the companies themselves engaged in production, hope to speed up the whole production and achieve the previous level in the coming days. Apparently, investors should be cautious.

Analysts warn that the situation in Texas oil is now of great importance for the market. Traders are sure to factor it in in the coming days, which may change the short-term forecast for the oil market.

The potential growth in hydrocarbon production on the territory of OPEC countries also adds fuel to the fire. Earlier, Saudi Arabia, Iran, Venezuela, etc., which previously announced an additional reduction in oil output, now intend to start increasing it. Of course, this will not happen immediately, the pace will not be rapid. Yet, in the medium and long term, it may adversely affect the market.

Moreover, tensions between the United States and Iran seem to have come to an end, which is bearish for the market. The new US president expressed his intention to end the conflict that the previous president had started and to establish a friendly tone of communication. Thus, the US may lift sanctions on the Iranian oil industry, which means that the supply of hydrocarbons will only soar. It may also significantly change the balance of power.

However, so far, oil prices managed to rise again to the record values. It has not happened for more than a year. Yet, this rally may be short-lived. So, investors need to be more careful.

The material has been provided by InstaForex Company - www.instaforex.com

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