Oil futures dipped on Thursday after Saudi Arabia trimmed the price of its flagship physical crude to Asia, but were still near more than three-month highs following a drop in U.S. crude inventories.
U.S. West Texas Intermediate (WTI) crude futures were trading at $49.60 per barrel at 0677 GMT, down 23 cents, or 0.46 percent, from their last settlement.
Brent futures were down 20 cents, or 0.39 percent, at $51.66 per barrel.
Both contracts hit June highs on Wednesday after U.S. data showed that crude stockpiles fell 3 million barrels last week to 499.74 million barrels. Despite this, stocks were still close to all-time highs.
Traders said Thursday’s fall reflected weaker physical crude after top exporter Saudi Arabia cut the price of its crudes to Asia for November in a sign that the global fuel glut persists.
Another potential cap on prices comes from the United States.
Jeffrey Halley, senior market analyst at brokerage OANDA, said that at $50 a barrel for WTI, U.S. shale drillers, who have spent much of the year cutting back production amid low prices, may start bringing back rigs.
Overall, however, analysts said that the market was well supported at current levels, especially because of a planned output cut by the Organization of the Petroleum Exporting Countries (OPEC).
“We expect that Saudi will shoulder the bulk of the production cuts with a reduction of 5 percent or 0.5 million barrels per day (bpd), with other Gulf States cutting by 0.3 million bpd. With Iran, Libya and Nigeria getting a ‘pass’, remaining cuts will be on the shoulders of some of the less reliable members in OPEC,” Bernstein Energy said in a note on Thursday.
However, Bernstein added that there was still some “skepticism that an agreement will hold … (as) the track record of OPEC over the past 30 years has not been good.”
Analysts said that there were also risks of forced supply disruptions.
“Oil prices seem headed for higher levels in the coming period,” Global Risk Management said in a report this week, pointing to the risk of “several oil producing countries struggling to increase or even keep production at current levels due to unrest/oil facility wreckages and lack of industry investments.”
Barring such disruptions, analysts did not expect prices to shoot up much further as production remains high even with an OPEC cut.
“Resilient production in the U.S. and Russia will postpone crude market rebalancing and keep the market in surplus into 2017,” BMI Research said.
“With an insufficient demand response to counteract strong supply, the result is a downward revision of our 2017 Brent forecast to $55 per barrel from $57 per barrel,” BMI said.
Source: Investing.com
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Thanks for the updates on oil prices