Oil slips from 2016 high as in­vestors book prof­its

The Pak Banker - - MARKETS/SPORTS -

Oil fell slightly on Fri­day as in­vestors booked prof­its at the end of a fourth con­sec­u­tive week of gains, but prices re­mained close to 2016 highs on ex­pec­ta­tions of a pro­duc­tion freeze by ma­jor ex­porters. Brent crude's front-month con­tract <LCOc1> was 20 cents lower at $41.34 a bar­rel by 0928 GMT, hav­ing ear­lier touched $41.71, its high­est this year.

US crude was down 10 cents at $40.10 bar­rel, af­ter ris­ing to as high as $40.55 -- higher than the pre­vi­ous peak of $40.36 reached on Thurs­day. The bench­mark had surged 4.5 per­cent to close at $40.20 in the pre­vi­ous ses­sion. Oil prices have climbed by more than 50 per­cent from 12-year lows reached in De­cem­ber, bol­stered as the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries ( OPEC) floated the idea of a pro­duc­tion freeze, boost­ing Brent from about $27 and US crude from around $26.

Many an­a­lysts think there is still steam in the rally. "There is con­tin­u­ing jaw-bon­ing about pro­duc­tion cuts from OPEC mem­bers and in­ven­to­ries are now com­ing in at the lower end, rather than the higher end of ex­pec­ta­tions," said Michael Hew­son, chief mar­ket an­a­lyst at CMC mar­kets.

Crude in­ven­to­ries in the United States <USOILC=ECI> in­creased by 1.3 mil­lion bar­rels in the week to March 11, to a record high of 523.2 mil­lion bar­rels, though that was a much smaller build than the 3.4 mil­lion bar­rels ex­pected by ana- lysts, the En­ergy In­for­ma­tion Ad­min­is­tra­tion said on Wed­nes­day. US oil is head­ing for a fifth week of gains, while Brent is on course for a fourth weekly in­crease, the long­est ris­ing streak in about a year for both bench­marks.

Other an­a­lysts, how­ever, urged cau­tion af­ter the strong gains. "Global fun­da­men­tals are lit­tle changed and oil has in­stead been lifted by higher riskap­petite," BNP Paribas said in a note. "A di­a­logue among key pro­duc­ing coun­tries to ad­dress oil out­put will at best yield a de­ci­sion to freeze out­put, but not the much- needed re­duc­tion re­quired to re­bal­ance the mar­ket." BNP es­ti­mates that there will be a 1 mil­lion bar­rel in­crease in global stocks by the end of the first half of 2016.

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