High prices took a sharp dip last week; but it was only very brief

In our report a month ago we highlighted the bullish nature the oil market has adopted and through the first half of this month the average Brent crude price (front month futures) was at $75/bbl; its highest for almost 3 years. Throughout this period Brent traded in the $74-78/bbl range, but prices never stay the same, and at the start of last week there was a ‘wobble’ and we saw Brent fall by $5/bbl, to below $70/bbl (minus 7%)

This sharp drop came with ‘jitters’ in the financial markets surrounding higher Covid cases and at a time of a two-week delay in OPEC+ reaching an agreement from its early July meeting.

However, what is interesting is that the bearish signals were very short-lived, and prices have very quickly rebounded, with Brent back above $74/bbl; the underlying price sentiment is still supportive at these levels.