--Oil rises on tighter fundamentals
SINGAPORE: Oil
prices rose yesterday, supported by signs of tightening supply and
demand fundamentals, although a warning about excessive China economic
optimism still weighed somewhat on markets.
Brent crude futures, the international benchmark for oil prices, were at
US$57.45 at 0639 GMT, up 22 cents, or 0.4% from their last close.
US West Texas Intermediate (WTI) crude futures were at US$51.54 per barrel, up 25 cents, or 0.5%.
The higher prices came after a more than 1% fall in prices the previous day.
“I think he is trying to warn people that we can’t keep running... at
that rate because it implies an ongoing increase in China’s debt-to-GDP
ratio and sooner or later that must slow down,” said Shane Oliver, head
of investment strategy at AMP Capital in Sydney.
Much of that concern had dissipated by yesterday, however, and analysts
said there were indicators of a tightening oil supply and demand
fundamentals.
“Oil market has moved into modest under-supply and we expect this will
persist at least through the end of the year,” US investment bank
Jefferies said.
US commercial crude oil stocks have dropped 15% from their March records, to 456.5 million barrels, below levels seen last year.
Drawdown due to rising exports
Part of this drawdown has been due to rising exports as a result of the
steep discount of WTI crude to Brent, which makes it attractive for
American producers to export their oil.
Additionally, crude futures price curves are in backwardation, which
makes it attractive to sell produced oil immediately rather than store
it for later dispatch.
RBC Capital Markets said: “A strong indicator that global inventories
are being run down will be when the market starts relying on US exports
to fill deficits.”
That moment may have arrived.
Shipping data in Thomson Reuters Eikon shows that overseas US crude oil
shipments have soared from virtually zero before the government loosened
export restrictions in late 2015 to around 2.6 million barrels per day
(bpd) in October.
“Physical bottlenecks are unlikely to kick in until waterborne (US) exports approach 3.2 million bpd,” RBC Capital Markets said.
Exports have been boosted since a production cut led by the Organisation
of the Petroleum Exporting Countries (Opec) has been in place since
January this year, and which Opec wants to expend beyond its current
expiry date at the end of March 2018.
“Our expectation is that Opec (and partners including Russia) will
extend production cuts through the end of 2018,” Jefferies bank said. —
Reuters
Read more at http://www.thestar.com.my/business/business-news/2017/10/21/oil-rises-on-tighter-fundamentals/#MogpuozDMB4C9b2c.99
