The Supply Glut in Crude Oil is Not Ending Anytime Soon

On the bearish side, last week’s sudden price dip is giving traders and investors the hibbie jibbies about the volatile nature of the markets. Andre Riley, in a recent market commentary at Saxon Trade observed that “the increase in U.S. gasoline supplies for the first time since February and a nine-week straight increase in U.S. crude production are encouraging oil shorts to place increased bearish bets on crude oil.”

Another analyst, Bjarne Schieldrop, chief commodities analyst at Nordic bank observes that oil prices will remain depressed going forward because OPEC is not likely to extend its supply cuts. He noted that OPEC is becoming increasingly vulnerable to “more stimulus of the U.S. shale oil sector.”

Interestingly, analysts at Goldman Sachs have observed the increased short side interest triggered panic selloff that weakened oil prices. Damien Courvalin and Jeffrey Currie in a Goldman Sachs report noted that “we view technicals rather than fundamentals as the driver of this move lower.”  The analysts also noted that there’s no fundamental basis for the sudden dip in oil prices because OPEC was already making progress in its bid to end the supply glut.

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