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Brent could reach $ 80 this summer as hedge funds lose steam

The prices of Brent Crude and WTI Crude reached a five-month high this week as signs of market contraction and clashes with wildcard maker OPEC Libya hit.

Brent Crude rose above $ 71 and WTI Crude rose above $ 64 a barrel in the middle The supply reduction this week outweighed fears of slowing economic growth.

Following the crash in the fourth quarter of 2018, oil prices have already risen by more than 30 percent this year.

However, there is still room for oil and Brent This summer, it could be up to $ 80 each, due to geopolitical issues, OPEC and allied cuts, robust demand and the not-so-crowded hedge fund hedge fund Barrels are rising According to a study by RBC Capital Markets, cited by CNBC.

RBC strategists have significantly increased their oil price forecasts for Brent and WTI average prices this year. Brent crude is expected to average $ 75 per barrel in 201

9, compared to the previous call of $ 69.50, while the annual average of the WTI will be $ 67 per barrel, compared to $ 61.30 in the previous estimate from RBC.

According to RBC experts, Brent could even hit $ 80 this summer.

This is a threshold that oil-consuming countries like India think are too high and analysts call it the beginning of weak demand.

"We see that price risk is asymmetrically upside-down by geopolitically infused rallies that could drive prices high or lower even beyond our high-end scenario and the $ 80 / barrel mark for this one Could polling summer for irregular periods ,? cited CNBC's notes by strategists Michael Tran, Helima Croft, and Christopher Louney Related: Thriving Permian Production to Cover Oil Rally

However, do not believe all analysts that Brent has around $ 10 a barrel compared to its current level. Goldman Sachs, for example, believes the rally has almost taken its course and Brent is unlikely to reach the $ 80 mark. Goldman has raised its Brent mean price call for the second quarter from $ 72 to $ 72.50, but expects shale production to increase and OPEC to lift some of the cuts in the second half.

But RBC warns that this summer we could see $ 80 Brent due to geopolitically motivated rallies in the oil price.

Several geopolitical factors could lead to higher oil prices in the coming months than the current $ 71 a barrel of Brent.

First, the US will announce within weeks whether some Iranian oil buyers would extend the exemption for the purchase of Tehran oil. Analysts widely believe that the "zero Iranian oil exports" will not take place at the beginning of May if the current exemptions expire as the administration would at least be more lenient towards some buyers so as not to overstate oil and gasoline prices.

Then there is the problem with the tightened US sanctions against Venezuela amidst the collapsing oil production of the Latin American country, plagued by sanctions and massive blackouts, and by 289,000 Bpd to under 1 million Bpd – to 732,000 Bpd – plunged in March according to secondary sources of OPEC.

In addition to these geopolitical concerns, Libya, one of OPEC's wildest maps of recent years, is following east defender General Khalifa Haftar and his self-proclaimed Libyan National Army (LNA) moving westwards in Libya's capital Tripoli, encountering renewed confrontation Troops of the UN-backed government that could escalate and repress Libya's oil production and exports are threatening.

In addition to geopolitical surges that have suddenly provided more than the OPEC cutbacks, the positioning of money managers in oil futures suggests that oil may still have room to rise after RBC tightening. See also: BP withdraws from China's slate pavement

"In short, there is still enough room for maneuver, as geopolitical hotspots still pose a clear and present threat to the market, but many die wounded bulls will remain after washing out the fourth quarter of 18, "say RBC analysts.

The ratio between bullish and bearish bets reached 13: 1 in the fall of 2018 and averaged 8.5: 1 last year, according to RBC. [19659002] In the week ending April 2, the ratio of Long-to-short positions in Brent and WTI ranged from 5.60 last week to 6.50, according to Reuters market analyst John Kemp. For comparison: In the past year, mid-April, this ratio was 15.00: 1, while at the end of September, before the price collapse in the fourth quarter, the ratio was 13.88: 1.

Among other factors that spurred the price of oil, China, both RBC and Goldman Sachs, said that demand is holding up. However, RBC warns that China and India are exerting excessive influence on the growth of global oil demand could pose a downside risk to oil prices if economic growth slows down significantly.

By Tsvetana Paraskova for Oilprice.com

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