Oil price rise could finally be on the way

CAUTIOUS OIL market bulls are stirring, sensing higher prices for future months after a first whisper that the glut may be set to slowly shrink.

The International Energy Agency (IEA) said lower prices will force non-OPEC producers including the United States to cut output by the steepest rate in over 20 years next year.

This helped push the difference in price between oil for delivery in October and for delivery in one year’s time to its widest in six months, at $8.0 a barrel.

“People are getting ready to press the ‘ buy’ button, but the thing is we are probably just still a couple of months too early,” Saxo Bank commodities strategist Ole Hansen said.

The outperformance of longer-dated crude prices seems to be more about a pick-up in the future prospects for the market, than gloom over the immediate outlook.

“Over the past week, most of the movement has happened has been a positive move at the back end of the curve, so a story like the (IEA) one does obviously help,” Hansen said.

The discount between immediate delivery of oil and delivery in a year is around half of what it was at the height of the financial crisis in 2008, but is well above long-term averages.

In the last 10 years, the one-12 months discount has averaged $1.07 a barrel.