Crude oil prices soar to multi-year highs
> Analysts warn of possible overheating
LONDON: Crude oil prices hit new multi-year highs yesterday as Opec-led production cuts and healthy demand helped to balance the market, but analysts warned of possible overheating.
A broad, global market rally, including stocks, has also been fuelling investment into crude oil futures.
US West Texas Intermediate (WTI) crude futures were at US$63.34 (RM254) a barrel, up 38 cents, at 1440 GMT. Earlier, prices rose to US$63.67 (RM277), the highest since Dec 9, 2014.
Brent crude futures were at US$69.02 a barrel, 20 cents above their last close. Brent earlier hit US$69.37, the highest since May 2015.
“We’re still drawing US stocks and that continues to support a very positive sentiment,” said Olivier Jakob, managing director of PetroMatrix.
He noted that physical Brent was above US$70 per barrel – a psychologically important level. “It will trigger some increased discussion within Opec,” Jakob said.
Opec – the Organisation of Petroleum Exporting Countries – together with Russia and a group of other producers, last November extended an output-cutting deal to cover all of 2018.
The cuts were aimed at reducing a global supply overhang that had dogged oil markets since 2014.
The American Petroleum Institute said on Tuesday US crude inventories fell by 11.2 million barrels in the week to Jan 5, to 416.6 million barrels.
This came as the US Energy Information Administration (EIA) raised its 2018 world oil demand growth forecast by 100,000 barrels per day (bpd) from its previous estimate. Official EIA stocks data was due at 1530 GMT yesterday.
Amid the bull run, which has pushed up crude prices by more than 13% since early December, there are indicators of an overheated market.
In the US, crude oil production is expected to hit 10 million bpd next month, leaving only Russia and Saudi Arabia at higher levels.
“Selective perception is the reason why the market is completely ignoring this just now,” Commerzbank analyst Carsten Fritsch said.
“Attention is paid only to news that tallies with the picture of rising prices,” he added.
In Asia, the world’s biggest oilconsuming region, refiners are suffering from high prices and ample fuel supplies.
Asian oil prices are higher than in the rest of the world.
While Brent and WTI are below US$70 per barrel, the average price for Asian crude grades has risen to US$70.62, Thomson Reuters Eikon data showed. – Reuters