Americas News
Despite Anticipation Building over OPEC Meeting, Crude Prices Will Be Capped by Rising U.S. Shale: Analysts
As anticipation builds over the impending November 30 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and whether it will extend its crude production cuts during that event, the market on Tuesday achieved modest gains - but many analysts say a variety of factors will keep prices capped at equally modest levels for the time being.
West Texas Intermediate settled up 41 cents to $56.83, recouping most the losses it posted on Monday, while Brent was up 27 cents at $62.49 per barrel.
Ole Hansen, senior manager at Saxo Bank, noted that "the market is just waiting for confirmation that OPEC wants to move on with the extension."
Indeed, Bill Baruch, president of Blue Line Futures, told Bloomberg television, "I don't think [WTI] is going to break out through $60 quite yet, I'm targeting $58.97 ahead of the OPEC meeting.
"One of the reasons why I don't think crude can push through $60 yet is because of positioning: longs have a very healthy position, the largest since February; we're going to have to see a little bit of a cleansing....and then make a second attempt in the first quarter of next year."
Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics, had this to say about the run-up to the OPEC meeting: "Geopolitical tensions in the Middle East and a deteriorating macroeconomic picture in Venezuela will remain supportive of oil prices."
But he voiced an all-too familiar caveat: "However, persistently high oil production in the United States will be the predominant bearish factor limiting gains in oil prices."
Indeed, Westwood Global Energy Group said U.S. output will climb even faster than indicated by the rising rig count, which has jumped from 316 rigs in mid-2016 to 738 last week; the consultancy stated that it "forecasts an 18 percent increase in active rigs in 2018, but more rapid demand growth in certain service areas as operators focus on efficiency and delivering more for less."
Last week, the International Energy Agency said the U.S. is expected to account for over 80 percent of growth in world crude supply in the next decade or so and in the short term threatens to undermine any benefits arising from an OPEC cutback extension.
