Business Standard

Oil retreats from $70 highs butset for fourth week of gains


Oil prices eased on Friday after hitting a three-year high of more than $70 a barrel the previous day, but they remained on track to post a fourth straight week of gains.

Brent crude futures traded 6 cents lower at $69.20 a barrel at 1449 GMT. The contract broke above $70 on Thursday for the first time since December 2014.

US West Texas Intermedia­te (WTI) crude futures were at $63.66, down 14 cents. WTI the day before rose to its strongest since late 2014 at $64.77.

“It is remarkable to see that most market analysts believe that prices have rallied too far since consensus forecasts are significan­tly lower than the current spot prices,” Hans van Cleef, senior energy economist at ABN Amro, said in a note.

“On the other hand, most investors are still positioned to benefit from further price gains,” he said.

Analysts and traders have warned about the risk of a price correction since the start of 2018, but they say overall market conditions remain strong, mainly due to output cuts led by the Organizati­on of the Petroleum Exporting Countries (Opec) and Russia.

Fatih Birol, head of the Paris-based Internatio­nal Energy Agency, said on Friday that oil prices at $65 to $70 risked encouragin­g more oversupply from US shale drillers.

Gulf Opec producers plan to keep their oil output in the current quarter below the year-earlier level despite strong demand growth and a drop in global inventorie­s, a senior Opec source familiar with Gulf oil thinking said.

In addition to the Opec and non- Opec production cuts of 1.8 million barrels per day (bpd) that are due to last until the end of 2018, oil prices have found support from eight consecutiv­e weeks of US crude inventory drops. US commercial crude stocks fell by almost 5 million barrels in the week to January 5, to 419.5 million barrels.

That was slightly below the five-year average of just over 420 million barrels, the target for Opec and others cutting output.

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