Demand recovery and supply limitation:
If it has been more than a year that crude oil prices suffer from the Covid-19 pandemic, hope seems to be reborn on the markets currently with, in particular, the prospect of a return to normalcy for this summer in the United States and the free movement in the country.
Meanwhile, the OPEC+ alliance, which unites OPEC member countries and ten other producers including Russia, met last week and decided to stick to its policy of caution regarding production increases.
Although producers who are not part of this agreement remain limited, the number of then active in the U.S. did not increase last week according to the latest data reported. This shows that shale oil operators have not taken advantage of the rising prices to increase their production.
Drilling has therefore remained limited for four months while prices have already gained 30% but this caution is not to be associated with economic considerations but rather with environmental considerations. Indeed, investors in shale oil will have to be more cautious in the future.
Another factor in the current price hike is that the Iranian nuclear negotiations are stagnating. Indeed, it would be enough for the United States to decide to lift sanctions against this country for OPEC to decide to massively increase production and for oil to start flooding the market again.
A rise followed by profit taking:
While yesterday's rise in the session was appreciable for investors, it did result in a slightly bearish correction as WTI for July delivery lost 0.60% to $69.20 and Brent crude for August delivery lost 0.65% to end the session at $71.42.
The slight decline in oil was the result of profit taking as the major psychological threshold of $70 was crossed during the day.
It is indeed important to understand that most of the time, the movement observed on the prices is above all a reflection of the fact that the market takes advantage of the valuation of oil and that it does what it is accustomed to do, i.e. to sell at a profit when the opportunity arises. This is indeed the analysis made by analysts specializing in this stock market commodity.