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Crude Oil Rallies amid Unfavorable Fundamentals

June 27, 2017 at 18:09 by Vladimir Vyun

Crude oil rallied today, gaining more than 1%, even as fundamentals did not look particularly supportive for the commodity. The possible reason for the rally was the weakness of the US dollar.

Attempts of the Organization of Petroleum Exporting Countries and some other major producers to buoy oil prices by cutting production faced an obstacle in the form of rising US output. In fact, the resurgence of US shale firms may lead to a record output from the United States next year, making the USA challenge Russia and Saudi Arabia for the title of the world’s biggest oil producer. Yet OPEC delegates signaled that they are not in a rush to deepen the production cuts, though they did not rule out such possibility.

With that said, challenges to expanding US oil pipeline network and sometimes inefficient use of the existing pipelines may prevent US supply from growing as fast as it potentially capable of. Additionally, some analysts argued that the market became too one-sided, with short positions on oil piling up. As prices rarely go in one direction for long, there are speculations that crude may have found a bottom.

August futures for delivery of WTI crude oil rallied 1.8% to $44.16 per barrel as of 18:02 GMT on NYMEX today. Contract for Brent crude gained 1.72% to $46.62 per barrel on ICE.

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