Americas News
High Oil Price Predictions Abound as US Crude Hits 4-Week High
Crude on Tuesday achieved the best close in four weeks on the strength of a forecast U.S. inventories drawdown; and while this had previously been predicted by analysts to no positive effect, this time the news was enough to offset reports that the lifting of a force majeure has caused Libya to resume production.
West Texas Intermediate settled up 79 cents at $51.03 per barrel while Brent rose 95 cents to $54.07, pushing the global benchmark into overbought territory for the first time since the end of December; both contracts have recovered 8 percent since hitting four-month lows in late March.
Analysts believe industry data will show a decline in inventories later this week, as demand is said to be increasing ahead of summer in key markets; Carsten Fritsch, commodities analyst at Commerzbank, remarked, "U.S. product stocks need to be watched closely, since they have fallen massively over the last few weeks."
If a Bloomberg survey of analysts proves accurate, U.S. crude supplies will have declined 150,000 barrels last week.
Tuesday's turnaround even encouraged some observers to credit the much-maligned Organization of the Petroleum Exporting Countries (OPEC) output reduction initiative for contributing to a recovering market: "We believe the implemented production cuts will trigger a material drawdown in OECD oil inventories and thus higher crude oil prices," said Giovanni Staunovo, analyst for UBS.
Even though the market could just as easily and suddenly plummet in coming days, Tuesday's gains prompted some experts to join the small but vocal chorus of analysts who of late have defied common wisdom and predicted that crude will soon escape its range-bound confines and trade in the $60s.
David Pursell, a managing director at Tudor Pickering Holt & Co., told Bloomberg he sees crude reaching $65 per barrel in the fourth quarter of this year and $75 in 2019 (the former figure, incidentally, is in line with Staunovo's forecast for the next three months).
Pursell also anticipates expects an inventory drawdown over the next two months large enough for stockpiles to return to normal levels by the end of the third quarter:
Earlier this week, Pierre Andurand, managing partner at Andurand Capital Management, told media that "I think oil prices are likely to recover to around $70 ... I think the market will switch to backwardation – sustainable backwardation – by late summer and that will bring the next wave in oil prices."
