Oil prices rise to near one-month high
Oil prices rose in trading on Tuesday to a near one-month high on reports of increased US demand and a drawdown of US crude inventories, which outweighed news of a recovery in Libyan crude production.
Brent futures rose up $1.05 to end the day at $54.17/barrel. Reuters reports that increase pushed the global benchmark over its 100-day moving average, into overbought territory, for the first time since December.
US WTI crude was up 79 cents to $51.03/barrel.
Both contracts were at their highest since March 8. Late last month, both hit four-month lows but have recovered 8 per cent since then on expectations that the OPEC supply cut pact will be extended.
Jim Ritterbusch, president of energy advisory firm Ritterbusch & Associates said in a note “OPEC compliance is still holding better than we expected with next week’s release of various monthly agency reports likely to confirm.”
According to the Reuters report, demand is picking up in key markets, including the United States, the world’s largest oil consumer. According to analysts’ forecasts, data released later Tuesday by API and early Wednesday by the EIA is expected to show a drop in US crude stocks, the first time in two weeks.
A decline in refined product inventories is also anticipated.
“U.S. product stocks need to be watched closely, since they have fallen massively over the last few weeks,” Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt told Reuters.
Global inventories remain high because production cuts made by OPEC and non-OPEC members participating in the supply deal are taking longer than expected to impact the market, but UBS analyst Giovanni Staunovo said the process was well under way.
“We believe the implemented production cuts will trigger a material drawdown in OECD oil inventories and thus higher crude oil prices,” Staunovo said, referring to the Organisation for Economic Co-operation and Development.
“We expect Brent oil prices to rise above $60 a barrel in three months,” Staunovo told Reuters.
According to Reuters commodities analyst Wang Tao, US light crude may drop back to $49.62 because it did not break resistance at $50.95 and Tao says Brent crude may retrace back to $52.79/barrel.
Libya has reported an increase in crude output after pipelines from two of the country’s western oilfields were shut down by protesters late last week. The state-owned National Oil Corp has lifted the force majeure on loadings of Sharara crude from the Zawiya terminal.
