We are back closing in on the $100 per barrel mark already. What has been causing this?
I will tell you a couple of things. It has been exciting from a trading perspective really since June or July. It has been one-way traffic and I think that explosive move to the upside has been enjoyed by traders. When we roll into also the Russia and the Saudi Arabia situation as far as production cuts, we take on board what can happen in the next matter of weeks, and I think that is going to be higher prices from here. So, that is the storyline over the last couple of months and yes, strap yourself in because it seems to be onward and upward. But what is the expectation now beyond 100, very likely and if we do hit that mark, are we going to sustain above 100 for long?
Well, I do not know how far, much further it can go. Everyone was saying 95 and keep an eye on it. Well, we are at 97.5 now. So, we are knocking on the door of 100. If it is momentum driven and it seems to be very-very solid over the last two to three weeks as far as trading, then you just do not get in the way of a bull market.
So, probably there is more upside capacity. Let us have a chat at 105 or 110 and then we will get a real indication. But many of the hedge funds are saying that it is 110 to 120 by Christmas, so it is not a good sign for consumers anyway.
And the other thing I also wanted to talk about was while we are talking about Saudi, Russia extending the production cuts, by no way can one really deduce that this escalation in crude prices is coming because world growth and demand is actually on an uptick, right? I mean, in that case, it is a special situation trigger.
Absolutely and that is the other side or as far as supply-demand, that is a knife edge. So, you take that out of it and we understand from a consumption standing, that is very-very weak as far as growth and the potential for growth across the globe with inflation and all of those high rates and the impact that is having to not only domestic economies, but the export market.
So, we look at German manufacturing, we look at the Nasdaq or the S&P and how they derive majority of their earnings offshore.
They need strong markets. Now, this is the other side. So, at the moment, the producers are holding the ace card and we are just sitting here going, well, how much further or how much more momentum is there in the short to medium term?
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