Economy

Oil markets stable, but doubts over recent bull run emerge

Oil markets stable, but doubts over recent bull run emerge”

Oil prices may be approaching the point at which shale oil producers in the United States kick into overdrive, undermining an approach by the Organization of Petroleum Exporting Countries to correct an oversupplied market with coordinated production cuts.

The American Petroleum Institute (API) reported a weekly draw of 1.562 million barrels in USA crude oil inventories, against an S&P Platts' survey of analysts that expected inventories would dwindle by 2.7 million barrels.

The West Texas Intermediate for December delivery ticked down 0.15 USA dollar to settle at 57.20 dollars a barrel on the New York Mercantile Exchange, while Brent crude for January delivery lost 0.58 dollar to close at 63.69 dollars a barrel on the London ICE Futures Exchange.

Brent crude hit $64.65 earlier this week, its highest since mid-2015, as political tensions in the Middle East escalated after a sweeping anti-corruption purge in top crude exporter Saudi Arabia, which in turn has confronted Iran over the conflict in Yemen.

"This may result in lower prices in 2019", FGE said. Still, traders expressed caution that the oil price rally may have run its course after pushing up Brent more than 40 percent since July.

United States light crude CLc1 was up 46 cents or 0.8% at US$57.27, just shy of this week's more than two-year high of US$57.69 a barrel.

The rally has largely been driven by crude output cuts from producing nations led by the Organization of the Petroleum Exporting Countries and Russian Federation.

OPEC will discuss output policy during a meeting on November 30, and it is expected the group will extend the cuts beyond the current expiry date in March 2018.

In its short-term market report, published Tuesday, the U.S. Energy Information Administration raised its growth forecast for next year by about 6 percent to 720,000 barrels per day, to give an average production rate for next year of 9.95 million barrels per day.

Brent futures have gained around 14 percent in the last month alone, propelled largely by evidence that output cuts by OPEC and its partners are reducing the global oil glut.

Key for the last weeks of the year is whether traders remain confident about their huge bets on further price rises, or whether they sell out of these positions, satisfied with recent strong gains.

"It doesn't matter how bullish the fundamentals are ... when an asset goes vertical there is always room for a pullback and consolidation of recent price moves", said Greg McKenna, chief market strategist at brokerage AxiTrader.



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