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OIL AND STOCKS ARE ON A NEW BULL RUN

After several months of inactivity, many investors are buying into the bullish story on oil, as prices have hit new multi-year highs and stocks are skyrocketing once again. On Thursday, the international oil prices hit new three-year highs and kept climbing Friday, as demand has improved and supply shortages intensify in some places. A month after Hurricane Ida made landfall, production outages from it have continued with nearly 300,000 daily barrels of oil still offline. International travel restrictions are starting to be loosened resulting in to rise in demand for oil. The International Energy Agency’s latest oil update forecast that “strong pent-up demand and continued progress in vaccination programs should underpin a robust rebound from the fourth quarter of 2021.” And OPEC recently raised its demand forecast for 2022. 

Oil stocks are also on the rise and have had a banner week. Some of that might be attributed to the decision by ConocoPhillips (COP) to buy Royal Dutch Shell’s (RDS.B) assets in the Permian basin for $9.5 billion, a vote of confidence in shale drilling by one of North America’s largest producers. Other shale specialists have also joined. Diamondback Energy (FANG) stock is up 14% this week, after being mired in a slump since early July. There are other indications that supply will remain weak as demand rises. While President Biden said at the United Nations this week that he is open to restarting the nuclear deal with Iran, the state of that deal and Iran’s substantial oil production is still up in the air. If the deal isn’t signed, millions of Iranian barrels of oil could stay off the market, depleting supplies and continuing to prop up prices.