Oil hits two-week high on share market recovery, Mideast tensions

Randall Padilla
February 21, 2018

An effort by the Organization of Petroleum Exporting Countries, now in its second year, to drain the surplus from the five-year average of crude oil inventories held by the world's leading economies has set a floor under the price of oil of around $50 per barrel.

By mid morning in London, Brent was down 0.72% at $65.22 a barrel, while Nymex WTI gained 0.81% to $62.05.

However, "short term crude demand aspects and other fundamental indicators [are] still rather bearish-looking", analysts at consultancy JBC Energy wrote in a daily note Monday.

The West Texas Intermediate for March delivery increased 0.34 USA dollar to settle at 61.68 dollars a barrel on the New York Mercantile Exchange, while Brent crude for April delivery added 0.51 dollar to close at 64.84 dollars a barrel on the London ICE Futures Exchange.

Oil headed toward its highest close in two weeks on investor optimism after Opec's secretary general said the market's journey toward equilibrium is gaining traction.

Suhail al-Mazroui, energy minister for the United Arab Emirates, told media of the alliance formation, saying OPEC was urging its members to build oil capacity buffers to temper any wild upswings in price due to the weak US dollar this year.

"(This is although) Friday's price movements were likely position sensitive, amid USA dollar risk reduction and book squaring, ahead of tomorrow's oil contract expiration.

The US dollar dropped back on Wednesday and is now down 12pc over the past year against the country's major trading partners.

Non-OPEC stocks outside North America are also believed to decline this year and the next. Oil rigs operating for new output added in number for the fourth consecutive week to 798 in the previous week, suggesting that United States crude production may climb further.

Bloomberg speculated that "Choosing a different measure of success could further reinforce the need for supply curbs to continue for the whole of 2018 - something Saudi Arabia is keen to ensure as it prepares the historic initial public offering of its state oil company".

In any case the growing U.S. production threatens to undermine OPEC's efforts.

The American Petroleum Institute (API) is set to state its forecast regarding the U.S. crude supply on Wednesday.

Other reports by AllAboutTopnews

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