Oil tops $50 a bar­rel as global de­mand out­look bright­ens

The Daily Star (Lebanon) - - BUSINESS -

Oil topped $50 a bar­rel for the first time and closed at a six-week high amid height­ened op­ti­mism that a de­mand resur­gence is in the off­ing.

Fu­tures jumped 1.2 per­cent in New York and closed just 11 cents shy of the $50 mark. Two of the most in­flu­en­tial or­ga­ni­za­tions in world oil mar­kets – the In­ter­na­tional En­ergy Agency and the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries – nudged their de­mand fore­casts higher, sig­nal­ing con­tin­ued ero­sion of a global glut that has weighed on prices.

Al­though bullish de­mand out­looks have been driv­ing prices higher, there’s a psy­cho­log­i­cal bar­rier at the $50 mark, which is “still a sell­ing point for a lot of peo­ple,” Michael Lynch, pres­i­dent of Strate­gic En­ergy & Eco­nomic Re­search Inc. in Winch­ester, Mass., told Bloomberg by tele­phone.

Some in­vestors are “not con­vinced that the mar­ket bal­ance is changed enough to sup­port a price above $50 as of yet.”

Oil de­mand for 2017 will ex­pand by the most in two years, the Paris­based IEA said Wed­nes­day. That fol­lowed OPEC’s in­crease of its es­ti­mate for how much crude buy­ers will seek from the car­tel next year, driven by ris­ing con­sump­tion in Europe and China.

In the U.S., hur­ri­cane-driven re­fin­ery out­ages spurred fuel dis­trib­u­tors to pull a record amount of ga­so­line from stor­age tanks to cope with short­ages last week, gov­ern­ment data showed.

Oil hasn’t man­aged to set­tle above $50 in New York since July 31 as ef­forts by OPEC and part­ners in­clud­ing Rus­sia to whit­tle the sup­ply sur­plus floun­dered.

This week, OPEC and its al­lies were said to be dis­cussing ex­tend­ing sup­ply cuts past the end of March, and com­pli­ance with the sup­ply lim­its rose to 96 per­cent in Au­gust, OPEC data from so-called sec­ondary sources showed.

West Texas In­ter­me­di­ate for Oc­to­ber de­liv­ery climbed 59 cents to set­tle at $49.89 a bar­rel on the New York Mer­can­tile Ex­change after earlier reach­ing $50.50 dur­ing the ses­sion. To­tal vol­ume traded was about 40 per­cent above the 100-day av­er­age. WTI rose above its 200-day mov­ing av­er­age for the first time since early Au­gust.

Brent for Novem­ber set­tle­ment in­creased 31 cents to end the ses­sion at $55.47 a bar­rel on the Lon­don­based ICE Fu­tures Europe ex­change. The global bench­mark crude traded at a premium of $5.12 to Novem­ber WTI.

An En­ergy In­for­ma­tion Ad­min­is­tra­tion re­port Wed­nes­day showed

Oil de­mand for 2017 will ex­pand by the most in two years

U.S. ga­so­line stock­piles slid to 218.3 mil­lion bar­rels last week.

At the same time, oil out­put rose by the most since 2012 and crude stock­piles ex­panded by the most since March.

For WTI crude to sus­tain a $50plus price tag, traders will re­quire “in­creas­ing clar­ity on OPEC’s strat­egy on even­tu­ally bring­ing back bar­rels onto the mar­ket and the pos­si­bil­ity of an ex­ten­sion be­yond March,” said Eric Nut­tall, se­nior port­fo­lio man­ager with SPR & Co. in Toronto.

The EIA said global oil de­mand will rise to 104 mil­lion bar­rels a day in 2030 from 95 mil­lion bar­rels a day in 2015 in the or­ga­ni­za­tion’s an­nual In­ter­na­tional En­ergy Out­look re­leased Thurs­day.

Saudi Ara­bia was pre­par­ing con­tin­gency plans for a pos­si­ble de­lay of an ini­tial pub­lic of­fer­ing of its state-owned oil com­pany by a few months into 2019, ac­cord­ing to peo­ple fa­mil­iar with the mat­ter. – Bloomberg News

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