HomeMarket NewsOil Prices Surge, but Market Experts Remain Cautious About Sustainability

Oil Prices Surge, but Market Experts Remain Cautious About Sustainability

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Data analyzing in commodities energy market: the charts and quotes on display. US WTI crude oil price analysis. Stunning price drop for the last 20 years.

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Crude oil has experienced a surge in prices, achieving its best quarterly performance since the initial months of the war in Ukraine. However, financial experts on Wall Street remain skeptical about the sustainability of this rally, as high prices are beginning to impact demand.

Strong Performance in the Oil Market

During Q3, front-month WTI crude saw a remarkable 28.5% increase, closing at $90.79 per barrel. Additionally, front-month Brent crude posted a 27.2% gain, reaching $95.31 per barrel. In the weekly closing, WTI rose 0.8% and Brent gained 2.2%.

Analysts Predict Limited Long-Term Price Increase

Despite this surge, industry analysts do not anticipate oil prices staying above $100 per barrel in the near future. Most experts believe prices will stabilize around $90 per barrel for the remainder of the year.

High Oil Prices Begin to Impact Demand

J.P. Morgan analysts have observed a decline in gasoline consumption in July, signaling the impact of high oil prices on demand. Airlines have also reported sales at the lower end of expectations. Natasha Kaneva, JPM’s head of global commodities strategy, commented, β€œDemand risks are shifting to the downside. With pump prices surging and a seasonal travel peak now behind us, a greater share of demand in the fourth quarter will be concentrated in sectors more sensitive to economic growth.”

Potential for Increased Production and Price Control

UBS analysts predict that high oil prices will eventually incentivize U.S. producers to boost production, despite the current decrease in active, oil-targeted rigs. Additionally, Saudi Arabia may tap into its substantial spare crude capacity to lower prices and mitigate potential damage. CIBC’s Rebecca Babin expressed concern about the negative consequences higher prices could have on the market.

Performance in the Energy Sector

The energy sector achieved a positive performance this week, with the Energy Select Sector SPDR Fund (XLE) recording a 1.6% gain.

Top Gainers in Energy and Natural Resources:

  • (METC) +22.6%
  • (NGS) +16.5%
  • (WAVE) +16.3%
  • (HNRG) +15.4%
  • (KOS) +14.7%

Top Decliners in Energy and Natural Resources:

  • (NEP) -39.2%
  • (NEE) -15.4%
  • (TPIC) -14.2%
  • (IE) -13.9%
  • (AQN) -13.8%

Sources: Seeking Alpha, Barchart.com

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