Oil 60$ ? Oil prices rose for the sixth time in seven sessions on Wednesday, propelled higher by signs that U.S. supplies are finally dwindling and helping rebalance the market.
Crude oil for May delivery CLK7, +1.25% jumped 63 cents, or 1.2%, to $51.65 a barrel, setting it on track for its highest settlement since March 7.
Brent oil LCOM7, +1.29% — the international benchmark — gained 69 cents, or 1.3%, to $54.85 a barrel, also set for its highest close in almost a month.
The gains come after data from the American Petroleum Institute late Tuesday showed U.S. crude oil inventories fell by 1.8 million barrels last week, sparking hopes the official report from the Energy Information Administration on Wednesday morning will show the same trend. The data come out at 10:30 a.m. Eastern Time.
Analysts, on average, expect the EIA data to show a 200,000 barrel fall in inventories, according to a survey by The Wall Street Journal.
While the drawdown adds to expectations that demand will outstrip supply in the coming months, the rebalancing process will be gradual and any price rally could be short-lived, some analysts say. Ole Hansen, head of commodity strategy at Saxo Bank, said fundamentals in the oil market aren’t yet strong enough to support a sustained recovery and think oil prices are likely to dip in coming months.
“The fragile sentiment which resulted in a sharp correction during March is unlikely to go away any time soon. OPEC is potentially being forced to extend current production cuts beyond six months to achieve its goal of balancing the market,” he said in a note.
Oil prices have risen in recent weeks on hopes the Organization of the Petroleum Exporting Countries and prominent producers such as Russia agree to roll over a production-cut agreement, which is currently slated to end in June. The group is due to make a decision on May 25.
But the market may be too optimistic that the producers can agree on an extension, according to Hansen.
“There have been signs of frustration from Saudi Arabia related to slow compliance from Russia and Iraq. The question remains how a deal would survive for a full 12 months given the signs of unease less than 12 weeks into the deal,” he said.
To reflect those concerns, Hansen cut his full-year Brent forecast to $58 a barrel, from $60 previously, and his WTI forecast to $56 from $58.
“We believe the best the market can hope for in Q2 is for Brent crude to stabilize around $50 a barrel but cannot rule out a temporary drop to $45 a barrel.”
Meanwhile, a new gush of U.S. oil also stands to undercut price gains as number of oil rigs in operation domestically, both onshore and offshore, was 77% higher than prior-year levels in March, according to Platts Rig Data.
Elsewhere in the energy spectrum, Nymex reformulated gasoline blendstock for May RBM7, +0.76% — the benchmark gasoline contract — rose 0.8% to $1.74 a gallon, while gasoil for April climbed $7.75 to $486.75 a metric ton.
https://www.marketwatch.com/story/oil-prices-hold-four-week-high-on-bullish-data-2017-04-05