Brent crude hits peak for the year but analysts warn global glut is still huge
BRENT CRUDE rose on Monday, hitting a 2016 peak above $ 40 a barrel as producers sought a new anchor price for oil after a sell- off that has lasted nearly two years.
However, some analysts warned the global glut is still big.
Global crude prices have risen more than 40 per cent since two months ago when they hit 12- year lows.
Monday’s gains were helped by data showing a smaller- than- expected build in stockpiles at the Cushing, Oklahoma delivery hub for US crude futures and talk that OPEC was looking at a $ 50 bottom.
Oil’s rebound from lows of around $ 26 a barrel was also driven by chart- related buying and asset rotation by investors that resulted in higher allocations into commodities such as oil and copper, as well as equities.
“Money flows from broader financial markets are powering this broader rally in oil,” said Scott Shelton, energy broker with ICAP in Durham, North Carolina. “I don’t think the energy fundamentals for the next few days are going to matter much as the market is making a transition.”
Technical analysts said the oil rally could be nearing exhaustion at $ 40.
Others said the global crude market remained oversupplied by around 2 million barrels per day, while higher prices raised the prospect of US shale oil producers adding more drilling rigs after recent cutbacks.
FUEL FOR THOUGHT: The oil price has rebounded from lows of around $ 26 per barrel.