The relationship between the dollar and Brent became positive for the first time in 5 months.
Traditionally, they were in inverse relationship, as strengthening of the dollar reduced demand for denominated commodities, while the weakening of the currency gave the opposite effect.
Decision of Bank of Japan to boundedly expand the incentive program has disappointed the investors, strengthening the yen and weakening the dollar, while growth of stocks had a downward pressure on oil.
Investment banks worsened the forecast on oil prices in 2017
Analysts at investment banks, surveyed by The Wall Street Journal, decreased their forecast on average oil prices for the next year approximately by $1. Last summer they expected that this year the price of oil would exceed $ 70/barrel.
The average price of a barrel of Brent crude oil in the next year will be $56, US sort of WTI will cost $55/barrel, the analysts of 13 investment banks, surveyed by The Wall Street Journal, admit. These estimates are about $1 less than a month ago, the publication notes.
Banks, participating in the survey, believe that oil prices will remain below $50/barrel before the end of this year, and by the end of next year will increase to $60/barrel. Last summer many survey participants expected that this year’s prices would exceed $70/barrel.
In late July, the oil market returned to “bearish” cycle, which means lower prices for major brands of more than 20% from the last peak. According to the ICE exchange, hedge funds and other speculative investors reduced the number of bets on the price increase of Brent crude oil to a minimum for the last five-plus months.
After a prolonged period in oil price increase, which has been lasting from the beginning of the year, prices began to decline. According to WSJ estimates, one of the main reasons for trend changing is the excess of gasoline on a global scale, as refineries benefited from lower prices for oil and raw materials were actively bought in the past two years.
As a result, according to Citigroup data, global stocks of gasoline reached a record level of almost 500 million barrels.
This situation is aggravated by the reluctance of the petroleum exporting countries to cut its production, notes WSJ. In Russia, production is maintained at levels similar to the post-Soviet highs reached earlier this year. Production in Canada and Nigeria is also restored, though the supply of these countries in spring fell by 3 million barrels per day.
According to the estimates of analysts at the bank J.P. Morgan, which WSJ gives, time frames for the oil market achieving balance in recent weeks shifted due to the weakening of demand, the rapid resumption of supplies from Nigeria and increased production in Saudi Arabia, Russia and other exporting countries.