18 October 2017Reading time: 3 minutes

By the end of March we wrote about how the closed OPEC-deal caused for a boost in the oil prices, but that there were still some uncertainties in the market. Possibly that these uncertainties are no longer present, but new ones have arrived.Oil prices have continued to increase in recent months and reached the price of almost USD 60 a barrel of Brent oil by the end of September, which is the highest level in two years.

Shortly after this record the oil prices decreased again which according to analysts from Citigroup, was due by the profit taking by investors as an result of the price increase. The price of a barrel WTI oil plummeted to USD50, while the price for a barrel Brent oil came below USD 56.Citigroup expects that the upwards motion of the oil prices will continue during the fourth quarter. The American bank estimates that the price for a barrel WTI oil will be at USD 54 by the end of the year and for Brent oil at USD 58. This would be a remarkable development, because CNBC claims, based on historical data, that the oil prices usually decrease during the last three months of the year.

The expected price increases seem to be driven by the current oil supplies which are descending to the five year average. This is caused by the production limitations which the OPEC has imposed on itself. Meanwhile the International Energy Agency (IEA) claimed by the end of September, that the oil prices will rice strongly again at the end of this decennium. The IEA based their claims on the rising demand for oil, on which the expectation for 2017 is adjusted upwards to 1.6 million barrels per day.

When this demand would continue in the next years the IEA, according to, believes that the current large oil surplus will be totally consumed on the market. Maybe because during recent years, little has been invested in exploring new oil fields due to the relatively low oil prices. However, the IEA warns that the oil prices could become more volatile when the OPEC countries would decide to lift the productions limitations again. Analysts expect that the current deal, which ends in March 2018, will at least be extended.

Bloomberg also reported this month that Libya has started again with the production on the largest oilfield after these were closed due to the violence conflicts. This caused a short-term delay of the oil production and it cannot be ruled out that this may happen again in the nearby future.According to Reuters some investors anticipate on the possibility that the oil prices could end at USD 100 by the end of 2018. This could happen when the geopolitical tensions between North-Korea and the United States will rise further or even escalate. However future developments remains to be seen.

Analysts of Wood Mackenzie recently warned that a similar military conflict could affect more than a third of the ocean drilled oil in North Asia and therefore strongly disrupt the market. Also approximately 65% of the Asian oil production capacity is located in China, Japan and South-Korea, so a military conflict between North-Korea and the US could also have big consequences for the oil prices in the long run. For now it remains difficult to predict the outcome of this conflict.

Vontobel products are tradable at DEGIRO, Lynx and Interactive Brokers.

Important legal information:

This information does not constitute a financial analysis, but product advertisement. Thus it does not meet the legal requirements to ensure the impartiality of financial analysis and is not subject to trade prohibition before the publication of a financial analysis.

Fordetailed information, particularly regarding the structure and the risks associated with an investment in the derivative financial instruments, prospective investors should read the Base Prospectus, which is available together with the Final Terms and any supplement to the Base Prospectus in electronic form on the issuer’s website: Additionally, the Base Prospectus, anysupplements to the Base Prospectus and the Final Terms are available inprinted form, free of charge, at the registered office of the issuer: Vontobel Europe AG, Bockenheimer Landstrasse 24, 60323
Frankfurt am Main, Germany.

Investors should consider the applicable selling restrictions.
Companies of the Vontobel group may directly or indirectly pay commissions in varying amounts to third parties (e.g. brokers) in connection with the public offer and the distribution of the derivative financial instruments. Further information is available upon request from your distribution partner.


01/03/2021 03:05:35