Oil prices have improved slightly on Monday, prompting investors to take action while the momentum lasts and while the slowing economy has not yet hit too big on the crude oil industry.
PVM Oil Associates said in a research note, "The stock market performance is one of the reasons why oil keeps marching higher. There also seems to be a general belief that the agreed cut in OPEC+ production will be sufficient to balance the market," CNBC reported.
The latest data revealed that stock markets are doing fairly well so far in January. Analysts believe this is among the key factors that affected the decision of investors to grab the opportunity crude oil is offering. It appears that investors have put their faith in the production cut strategy's ability to balance the disturbed market.
Another reason behind investors rallying behind oil is believed to be the early signs of slower crude production growth this year. For investors, production cuts will help balance a slowing market.
Despite the current stability in stock markets, concerns of a slowing global economy are apparent. For ING commodities strategist Warren Patterson, "You can't justify oil prices at these levels." Patterson predicted that this year, prices could reach $70 per barrel. While this is a balancing factor for investors, it could be a blow to other factors such as demand.
Meanwhile, Tuesday was a whole new chapter for the oil industry as prices fell fast. Spectators expressed concerns over a decrease in demand as Brent crude oil prices locked at $62.26 per barrel. This amount is down 0.8 percent from the previous figures.
It is speculated that the rise and fall of oil prices across the globe have been largely affected by tensions between China and the United States. Furthermore, China unveiled its annual economic report on Monday, stating that the country saw its lowest economic growth figure in 28 years.
According to Reuters, IMF Managing Director Christine Lagarde said of the slowing economy, "After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising."
On the other hand, production cuts initiated by OPEC (Organization of the Petroleum Exporting Countries) have been providing support to the oil industry since late last year.
It is expected that the OPEC-led cuts will give the crude oil industry another hike in the coming weeks. If this happens, investors may once again rally behind one of the world's leading markets.
