Oil steady near 2-year highs; US sup­ply hike caps rise

Business World - - WORLD MARKETS -

NEW YORK — Oil prices held steady in a tight range Mon­day af­ter briefly test­ing lower, with sup­port from Mid­dle East ten­sions and record long bets by fund man­agers bal­anced by ris­ing US pro­duc­tion.

Brent crude fu­tures set­tled down 36 cents, or 0.60%, at $63.16 a bar­rel while US West Texas In­ter­me­di­ate ( WTI) crude fu­tures set­tled up two cents a bar­rel at $56.76. Last week, Brent rose to $ 64.65, its high­est since June 2015, and WTI hit $57.92, its high­est since July 2015.

Mid­dle East ten­sions have sup­ported the mar­ket, de­spite con­cerns that out­put could rise fur­ther.

“The rise by Saudi Ara­bia to pro­duce more than 10 mil­lion bar­rels per day ( bpd) would have reg­is­tered more,” said John Kil­duff Part­ner at Again Cap­i­tal. “This is a new level of geopo­lit­i­cal risk.”

Ad­di­tion­ally, the mar­ket has less sup­ply over­hang than it did a year ago, he said.

On the sup­ply side, ten­sions in the Mid­dle East raised the prospect of dis­rup­tions, traders said. A purge this month of Saudi Ara­bia’s lead­er­ship by Crown Prince Mo­hammed bin Sal­man is one of the key fac­tors rais­ing con­cerns about po­lit­i­cal sta­bil­ity of the re­gion’s largest oil pro­ducer.

Other re­gional con­cerns in­clude war in Ye­men and grow­ing ten­sions be­tween Saudi Ara­bia and Iran is a con­cern to in­vestors too.

Ad­di­tion­ally, traders said it was un­clear whether a strong earth­quake that hit Iran and Iraq on Sun­day had af­fected the re­gion’s oil pro­duc­tion.

Bahrain said at the week­end that an ex­plo­sion that caused a fire at its main oil pipe­line on Fri­day was caused by sab­o­tage, link­ing the at­tack to Iran, which de­nied any role.

Traders said crude prices were well sup­ported as out­put cuts led by the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries ( OPEC) and Rus­sia have con­trib­uted to a re­duc­tion in ex­cess sup­ply that had dogged mar­kets since 2014.

OPEC fore­cast higher de­mand for its oil in 2018 and said its pro­duc­tion-cut­ting deal with ri­val pro­duc­ers was re­duc­ing ex­cess oil in stor­age, point­ing to an even tighter global mar­ket next year.

How­ever, it also pointed out that Saudi out­put had risen above 10 mil­lion bpd.

The level of in­ven­to­ries held by in­dus­tri­al­ized above the fiveyear av­er­age “has fallen by more than 50% in 2017, with in­ven­to­ries cur­rently at around 160 mil­lion bar­rels,” con­sul­tancy Timera En­ergy said.

“If cur­rent trends con­tinue, in­ven­to­ries are likely to return to the five-year av­er­age at some stage in 2018.”

OPEC has sought to push stocks to the five-year av­er­age.

Hedge funds and other money man­agers raised their bullish wa­gers on US crude fu­tures and op­tions po­si­tions in the week to Nov. 7, data showed on Mon­day. The spec­u­la­tor group raised its com­bined fu­tures and op­tions po­si­tion in New York and Lon­don by 37,960 con­tracts to 381,666 dur­ing the pe­riod, the US Com­mod­ity Fu­tures Trad­ing Com­mis­sion said. That main­tained the high­est level since mid-April.

US pro­duc­ers added nine oil rigs last week, the big­gest jump since June, rais­ing the count to 738, en­ergy ser­vices firm Baker Hughes said on Fri­day. Rig count fell in Au­gust, Septem­ber and Oc­to­ber, but last week’s rise was the sec­ond in three weeks, in­di­cat­ing that the US oil in­dus­try was com­fort­able op­er­at­ing at cur­rent prices. —

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