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Saudi Cuts Fuel Impulsive Rally

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Crude oil prices reached their highest point in over seven months on Monday, putting an end to a two-week period of declines. This strong rebound was driven by mounting concerns regarding the tightening global supply conditions. Recent optimism in the oil market has been fuelled by expectations that major oil-producing nations will continue to maintain strict production limits. The growing expectations that the Federal Reserve will leave interest rates unchanged in September has also supported crude prices.

It is widely anticipated that Saudi Arabia will extend its voluntary reduction of oil production by 1 million barrels per day into the month of October. This extension is likely to trigger further rise in oil prices and is part of the coordinated supply restrictions led by the Organization of the Petroleum Exporting Countries (OPEC) and their allies, collectively known as OPEC+.

In the United States, the demand for oil remains robust, as evidenced by a consistent decline in commercial crude oil inventories over five of the last six weeks, according to data from the U.S. Energy Information Administration. Recent activity in the options markets has seen a surge in bullish sentiment, with call options volumes on U.S. oil futures reaching their highest levels since May.

The primary driving forces behind the latest movement in crude oil prices are the anticipated additional production cuts from major oil-producing nations, particularly Russia and Saudi Arabia. Saudi Arabia is expected to continue its voluntary 1 million barrel per day (bpd) production cut into October, while Russia has already implemented a reduction of 300,000 bpd in September, following a 500,000 bpd cut in August. Traders are now eagerly awaiting an official announcement detailing the planned production cuts this week.

Additionally, crude oil prices have found support in growing expectations that the U.S. Federal Reserve may be nearing the conclusion of its interest rate hiking campaign, and indications that China’s efforts to stimulate economic growth may be gaining traction.

In China, the unexpected expansion of manufacturing activity in August, has alleviated some concerns about the economic health of the world’s largest oil importer. China’s economy had been weighed down by challenges in its property sector since emerging from the COVID-19 pandemic. Investors have responded positively to recent economic support measures in Beijing, such as deposit rate reductions at major state-owned banks and eased rules for homebuyers.

A graph of stock market

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Source: TradingView

Last week’s price action decisively broke above key resistance of $83.53 confirming that the bear trend from the March 2022 high is complete and that higher price levels are likely to unfold in the coming months. The potential upside price target based on the breakout is in the range between $90.00 and $93.00. The persistent growth in U.S. oil production may act as a limiting factor on further substantial price gains over the medium-term. In the very short-term a minor pull back to unwind the overbought momentum conditions could be seen, however a resumption of the rally is anticipated thereafter.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Violeta Todorova

Senior Research

Violeta è entrata a far parte di Leverage Shares nel settembre 2022. È responsabile dello svolgimento di analisi tecniche e ricerche macroeconomiche ed azionarie, fornendo pregiate informazioni per aiutare a definire le strategie di investimento per i clienti.

Prima di cominciare con LS, Violeta ha lavorato presso diverse società di investimento di alto profilo in Australia, come Tollhurst e Morgans Financial, dove ha trascorso gli ultimi 12 anni della sua carriera.

Violeta è un tecnico di mercato certificato dall’Australian Technical Analysts Association e ha conseguito un diploma post-laurea in finanza applicata e investimenti presso Kaplan Professional (FINSIA), Australia, dove è stata docente per diversi anni.

Julian Manoilov

Marketing Lead

Julian è entrato a far parte di Leverage Shares nel 2018 come parte della prima espansione della società in Europa orientale. È responsabile della progettazione di strategie di marketing e della promozione della notorietà del marchio.

Oktay Kavrak

Head of Communications and Strategy

Oktay è entrato a far parte di Leverage Shares alla fine del 2019. È responsabile della crescita aziendale, mantenendo relazioni chiave e sviluppando attività di vendita nei mercati di lingua inglese.

È entrato in LS da UniCredit, dove è stato responsabile delle relazioni aziendali per le multinazionali. La sua precedente esperienza è in finanza aziendale e amministrazione di fondi in società come IBM Bulgaria e DeGiro / FundShare.

Oktay ha conseguito una laurea in Finanza e contabilità ed un certificato post-laurea in Imprenditoria presso il Babson College. Ha ottenuto anche la certificazione CFA.

Sandeep Rao

Research
Sandeep è entrato a far parte di Leverage Shares nel settembre 2020. È responsabile della ricerca sulle linee di prodotto esistenti e nuove, su asset class e strategie, con particolare riguardo all’analisi degli eventi attuali ed i loro sviluppi. Sandeep ha una lunga esperienza nei mercati finanziari. Iniziata in un hedge fund di Chicago come ingegnere finanziario, la sua carriera è proseguita in numerose società ed organizzazioni, nel corso di 8 anni – da Barclays (Capital’s Prime Services Division) al più recente Index Research Team di Nasdaq. Sandeep detiene un M.S. in Finanza ed un MBA all’Illinois Institute of Technology di Chicago.

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