Oil prices rally as traders buy the dip

Brent was up $2.05 at $31.30 a barrel by 1450 GMT, set for its biggest one-day rise since August 2015 and well above this week’s low of $27.10, while USA crude rose $1.75 to $31.28.

Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, increased for an 11th week to a record 64.2 million barrels, the EIA said in a report on Thursday.

Iran’s increased oil production will contribute to higher growth which faults the Organization of the Petroleum Exporting Countries (OPEC) decision to stabilize the price of oil by forcing non-OPEC countries to slow down production.

On Wednesady, Saudi Arabia’s Foreign Minister Adel al-Jubeir denied allegations that Riyadh intentionally drives down global oil prices by refusing to cut production. Crude prices remain near decade lows in the wake of Saturday’s Implementation Day announcement that will enable.

Yet broader market sentiment remained bearish as producers around the world pump 1-2 million barrels of crude every day in excess of demand, creating a huge storage overhang.

European Central Bank President Mario Draghi hinted Thursday at more easing measures amid renewed pressure on inflation in European economies from falling oil prices. The surge of supply alleviated the fears of oil company stability and investors rushed back into energy-related companies to “feast” on the buffet of accelerating profitability into the infinite future. The current dynamics of the financial markets, global economies and the current level of supply is more akin to that of the early-1980s. That theory is largely driven by expectations of Iran’s oil being introduced in the market once sanctions against the Middle Eastern country are lifted.

“We are reducing our oil price estimates in light of continuing oversupply in the global oil markets, with Iran poised to add more than 500,000 barrels per day (bpd) to global supply while demand growth remains tepid”, Moody’s said in a statement. What adds to a supply glut concern is the economic weakness in China, the second-largest consumer of the commodity in the world.

As such, in order for oil to rise there must be a reduction in supply because demand is unlikely to pick up the slack in any time period but the very long term.

Venezuela is one of five OPEC members who are at extreme risk due to the dropping oil prices.

If the Saudis thought that oversupply resulting in low oil prices would bankrupt the frackers of America and help them maintain market share, that too has not happened to the extent expected.