Oil prices have been rising recently as concerns about falling U.S. oil supply have mounted. The market is also hopeful that demand from China will recover soon, which would help support prices. Many analysts are expecting oil prices to continue to rise in the coming months as global supplies remain tight. If you’re interested in Commodities Trading, this information might be helpful.
What is commodities trading?
Trading commodities typically involves dealing with unprocessed or raw materials, like wheat, crude oil and gold. Commodity trading is completed in large quantities, such as barrels of oil, bushels of corn and kilograms of wheat.
Once the contract is ready, you can either take physical possession of the product or settle in cash. You can also use exchange-traded funds and notes to profit from price fluctuations without investing directly in futures or derivative instruments.
Why the concern of the United States?
On Tuesday, the cost of oil rose for a consecutive day as America’s primary supplying pipeline was inactive, with expectations that China will reduce COVID lockdown regulations to raise demand. As the biggest crude consumer on Earth, United States’ activity significantly influences this market; China is another major player in global consumption.
Brent crude futures experienced a surge of 0.8% in the international market, rising to $78.63 per barrel as of 02:02 GMT on Tuesday; with U.S West Texas Intermediate (WTI) crude following suit and registering an increase of 0.9%, up to $73.81 per barrel accordingly.
The shuttering of TC Energy Corp’s Keystone Pipeline, which moves nearly 620,000 barrels per day of Canadian crude from Alberta to the United States, has made oil supplies scarce and raised possibilities that stocks in Cushing, Oklahoma, will begin to deplete. Notably, Cushing is also the delivery point for WTI crude futures.
Since the 14,000-barrel leak in Kansas was detected on December 7th, Keystone has not been operational. TC Energy Corporation has yet to provide an estimated timeline for when they expect the pipeline to resume operations; this line must be reactivated as soon as possible since it supplies crude oil to refineries in the Midwest and Gulf Coast regions.
Market expectations assume that the pipeline closure will cause a decrease in US crude inventories. The average opinion of seven analysts polled by Reuters is that stockpiles decreased by 3.9 million barrels during the week ending on December 9th.
To prepare for the American Petroleum Institute’s report released on Tuesday and the U.S. Department of Energy’s statistical arm, the Energy Information Administration’s report was set to come out Wednesday, and a poll was conducted beforehand.
According to Bank of America’s analysts, the reemergence of China from its pandemic-induced restrictions and a shift in strategy by the Federal Reserve regarding interest rates could trigger an increase in fuel consumption that would likely push Brent oil prices above $90 per barrel.
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