Oil Prices Surge, Set Sights on $100: What's Fueling the Rally?
Oil prices have been on the rise, hitting their highest monthly close since October 2022.
What's worth noting is that the former resistance near $74, which had been in place since 2018, has now shifted to become a support level, indicating a strong bullish trend.
The real trend in energy stocks (NYSE:XLE) might just be getting started, as they've yet to make their significant move. Looking at the chart, they've recently crossed the psychological barrier set by the highs of 2008, with the highs from 2011 acting as a support level.
When we look at U.S. stocks of oil and other petroleum products, which are a highly visible part of the global market due to their weekly reporting, they've been on a decline, dropping by 34 million barrels since mid-July.
This downward trend has been observed in 5 out of the last 6 weeks. The decrease in U.S. inventories is seen as a sign that the global market itself is experiencing a deficit. Consequently, spot prices have been on the rise, along with the spread.
As of August 30, crude oil inventories were down by 10.514 million barrels. The data reported on June 28 this year showed a withdrawal of 9.603 million barrels. This has led to an increase in U.S. crude oil futures prices, particularly for monthly maturities.
The spread between 3-month crude oil futures has also entered a state known as 'backwardation,' meaning that the futures contract price is lower than the current spot price of the asset. This spread is currently at $1.14 per barrel compared to the situation in June.
Furthermore, in the first half of 2023, the US released approximately 26 million barrels of crude oil from the Strategic Petroleum Reserve. Since the beginning of 2022, around 247 million barrels have been released
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