EMEA News
OPEC Cut Talk And "Incredible Demand" Propels Brent Past $60 - But Experts Suggest the Gains May Be Short-Lived
Friday's market ended with a bang that saw Brent trading above $60 per barrel for the first time in over two years, bolstered by persistent comments this week from Saudi Arabia and its crown prince vowing to do whatever it takes to keep cutting production until the market has returned to a true supply demand balance.
Brent traded up $1.05 to $60.35, while West Texas Intermediate rose $1.17 to $53.81 per barrel - a nearly eight-month high.
In addition to the near universal expectation that the Organization of the Petroleum Exporting Countries (OPEC) will formally agree in November to extend their production cuts throughout 2018, traders were said to be buoyed by Friday's announcement of a ceasefire between Iraqi forces and the Peshmerga from the northern Kurdish region.
Jeffreys stated, "If OPEC and their non-OPEC partners can agree to extend their production curtailments through 2018, then we estimate the oil market will remain in modest under-supply until 2019."
Other experts agreed that the immediate future seems rosy compared to recent years, but they warned of the market's fluidity: Katie Nixon, CIO of Northern Trust, told Bloomberg, "We've got incredible demand...and we've got some supply constraints," referring to the OPEC production cutbacks and the hurricanes that disrupted U.S. production.
She added, "We think prices can be sustained at this high level for a while; but don't disregard the fact that supply is going to come back to the market: U.S. shale producers are very flexible and very willing to comer in at these prices."
Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, echoed Nixon's sentiments by stating, "Momentum may take us a little further here but longer term, I would expect a supply response here domestically.
"It's a market we feel is range bound (for U.S. crude) in the mid-$40s to mid-$50s."
Also ignored in Friday's celebratory spirit is the familiar argument that if OPEC agrees to another cutback extension but at the same cutback rate, that will result in a bearish future for oil.
