Oil prices have been rebounding to a certain extent during the last two days as traders have been considering new information and forecasts from major organisations in the energy sector in a recently rapidly changing landscape.
While demand and supply expectations were relatively stable during the last few weeks, the production cut announcement from Saudi Arabia was the start of a series of events that fueled volatility in the market.
Denys Peleshok, Head of Asia at CPT Markets said, “At a time when OPEC stopped short of any new organization-wide cuts, the Saudi cut could be enough to tighten the market during the following weeks to months.
“However, the continuing outflows in Russian oil and potentially higher production levels from other countries could alleviate upward price pressure to a certain extent.
“On the demand side, traders could continue to monitor the economic recovery in China, which was weaker than expected for now.
“The Chinese government could however move forward with plans for stimulus measures to boost the economy which could enhance oil demand levels at the same time.
“Overall oil demand is still expected to grow during this year but could increasingly slow down in the following years which could fuel downward price pressures over the longer term.
“Traders’ expectations could be affected significantly by the interest rates decision of a couple of major central banks.
“The Federal Reserve is expected to keep its rates unchanged at Wednesday’s meeting, which could give some room for the US economy to recover.
“However, the European Central Bank is expected to raise interest rates on Thursday, adding to the pressure on the already weaker European economy and on oil demand in the process.
“The Bank of Japan’s interest rate decision is expected on Friday and could affect oil demand expectations as well. As a result, oil markets could see some volatility in the coming days as traders readjust their forecasts.”