Oil Up 20% In 8 Days. What’s Next?

The price of brent crude oil has shot up by nearly 20% in just over a week, following our 2018 prediction that the oil market would be the comeback king for this year.

So why has oil jumped, what's next and how can you take advantage? Keep reading to find out!

The facts behind the oil price surge

On the 7 December 2018, OPEC, Russia and other oil-rich nations made an agreement to cut 1.2 million barrels of oil from the market every single day for the first six months of 2019, creating an imbalance between the supply of and demand for oil. Simply, removing so much of the oil supply while demand remains the same can result in big price swings as the market rebalances itself.

However, according to the Wall Street Journal, Saudi Arabia is planning deeper production cuts than agreed upon at last year's OPEC+ meeting. In fact, they plan to lower oil exports to 7.1 million barrels per day by the end of January, in an effort to push brent crude oil prices back up to $80 per barrel, which is their break even point.

But limited supply isn't the only culprit - another reason oil surged higher in the first two weeks of January is due to the market's position at the start of the year. In 2018, the price of brent crude oil crashed 42% it's annual high, leading many short traders to bail out of their positions at the hint of any good news.

This is known as a short squeeze, where a heavily shorted market moves sharply higher as short sellers close out their positions, adding more upward pressure on the market's price.

Will oil prices continue to push higher?

Now that oil has risen by nearly 20%, many traders are wondering whether there is scope for the oil price to continue to climb.

Continuing limited supply and unwinding short positions both paint a very strong picture for further gains to be made in oil prices. And, with most investment banks and analysts suggesting higher prices, the market is heavily leaned towards further upside, with brent crude oil price forecasts ranging from $60 to $72 per barrel.

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Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") ...

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