According to the energy industry economists, financial advisors and business leaders, the price of oil should increase. However, till now it is not happening. Oil market watchers were betting in beginning of February 2017 that price of oil would rise as OPEC with other oil producing countries pledged for cut in production. Although, almost 78% investors were taking bullish position on crude oil which resulted into price rise by around 20% .
In short time span, there is considerable rise with crude oil price rising as it stays above 50 USD/barrel level from December 2016. Energy industry insiders are expecting better price trend in year 2017 and even for the first time in December 2016 oil industry in Texas showed signs of stopping of economic contraction.
Just few week ago OPEC and its allies started to implement their cuts. However, observing at the market expectation if OPEC complies with pledged cuts we may see oil price increasing again due to lack of supply. But, it is not perfect expectation and there are lot more factors coming into play. If crude oil price rise is not as per expectation, traders may have to bear a heavy cost to hold on to oil contracts from this month to another one. Therefore, it leads to reducing the profits of those investors who are betting on oil market .
After analyzing the oil price trend for last two months, there was initial increment followed by stagnation of crude oil prices between 54-57 USD /barrel level. This is certainly a bad news for energy industry and energy industry investors. However, current scenario suggests that over supply will remain for some more time resulting into depressed oil price which is also OPEC’s main fear i.e. they have made the cut in production but inventories of crude oil keeps on increasing and crude oil price remains depressed.
If you go through the oil price trend since June 2014, there is gradual decline in the oil price. From June 2014 level of above 100 $/bbl to February 2016 level of around 27 $/bbl, there is a decline of almost 73%. And if you compare it with current level, then there are definitely some signs of recovery. As now we entered year 2017, various other industry economic indicators such as drilling rig counts and drilling permits issued has also increased. We strongly feel that the recovery has started but road to recovery will not be smooth and easy.