Oil price surge buoys Sasol
STRONGER oil prices sent Sasol 2.56% to R471.35 yesterday, while Standard Bank’s West Texas Intermediate crude oil tracking exchange-traded note jumped 7.38% to R10.62 on the JSE.
OIL traded near a five-month high after a further drop in US crude production signalled lower prices are taking a toll on the nation’s shale boom.
Stronger oil prices sent Sasol 2.56% to R471.35 while Standard Bank’s West Texas Intermediate crude oil tracking exchange-traded note jumped 7.38% to R10.62 on the JSE yesterday.
Futures fluctuated in New York after rising 6.3% the previous two sessions to at more than above $45 a barrel. Production slipped for a seventh week to the lowest since October 2014, a report from the Energy Information Administration (EIA) showed. Countrywide supplies rose by 2-million barrels to 540.6-million, the highest since 1929.
ConocoPhillips is reducing spending further as it posted its fourth consecutive quarterly loss.
“We are coming up to a tipping point,” said Dan Heckman, senior fixed-income strategist in Kansas City, Missouri, at US Bank Wealth Management, which oversees about $127bn.
“There will be a gradual tightening unless there’s an economic downturn. Prices should steadily move higher through the end of the year.”
Crude has rebounded after slumping to the lowest since 2003 earlier this year amid signs the worldwide surplus will ease as US production declines. Oil extended gains on Wednesday after US Federal Reserve officials signalled they remained upbeat about the country’s growth, and were less worried about risks posed by global economic weakness and financial-market turbulence.
West Texas Intermediate for June delivery rose 18c to $45.51 a barrel yesterday morning on the New York Mercantile Exchange. The contract reached $45.71, the highest intraday level since November 5.
Brent for June settlement advanced 44c, or 0.9%, to $47.62 a barrel on the London-based ICE Futures Europe exchange. The contract expires today.
The more-active July future advanced 11c to $47.04. The global benchmark crude traded at a $2.03 premium to West Texas Intermediate.
“Bullish sentiment is underpinning the market,” said Carl Larry, director of oil and gas issues in Houston for Frost & Sullivan. “There’s a lot of money moving into commodities. We are seeing a decline in US crude production and a growing reliance on imports of both crude and products.”
US production dropped by 15,000 barrels a day to 8.94-million a day through April 22, according to the EIA report on Wednesday. Petrol inventories rose 1.61-million barrels last week. Consumption of the fuel, averaged over four weeks, was up 5.6% from a year earlier, at 9.4-million barrels a day through April 22.
“I have every reason to think we’re soon heading lower with petrol leading the way,” said Thomas Finlon, director of Energy Analytics Group in Wellington, Florida. “Petrol is the seasonal leader and yesterday’s demand and inventory numbers were terrible.”
“The perception view crowd are starting to call the oil market rally the beginning of what will be a long bull market,” Dominick Chirichella, a senior partner at the Energy Management Institute in New York, told Reuters yesterday.
“Clearly, the market is primarily focused on the forward supply-and-demand picture, while continuing to push the bearish nearby fundamentals further into the background.”
Oil prices have risen 75% in about three months or less, since hitting 12year lows of about $27 a barrel for Brent in late January and about $26 for US crude in mid-February.
“The market seems ‘invincible’, and well supported my money flow,” said Scott Shelton, broker at Icap in North Carolina.