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

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. —