EMEA News
Sentiment Bests Fundamentals Again as Crude Firms On Reassurance that OPEC Won't End Cutbacks
A weaker dollar rather than fundamentals, coupled with more reassurances that the Organization of the Petroleum Exporting Countries (OPEC) will not prematurely end its production cutback strategy, compelled traders on Thursday to boost U.S. crude prices by 1.2 percent.
West Texas Intermediate settled up 74 cents to $61.34 per barrel, which extended its 2.4-percent gain achieved on Wednesday; however, Brent dropped 2 cents to $64.34 per barrel after climbing 2.6 percent the day prior.
While Thursday's performance is seen as a firming rather than a recovery of prices, Rob Thummel, portfolio manager at Tortoise Energy, was somewhat puzzled by the numbers: "I'm surprised that oil prices are falling today given the weaker U.S. dollar; currently, the direction of the dollar is having a bigger impact on oil prices than fundamentals."
The WTI gains are reportedly due not only to the weak greenback but also to Khalid al-Falih, energy minister for Saudi Arabia, who on Wednesday told reporters in Riyadh that "If we have to overbalance the market a little bit, then so be it, rather than quitting too early and finding out we were dealing with less reliable information" of inventories.
He added with regards to the OPEC cutbacks that It's better to "stay the course and make sure that inventories are where the industry needs them."
Presumably this was enough for traders to overlook more troubling comments al-Falih made that same day, namely, that finding reliable inventory data has been a challenge to more than a year of oil output cuts designed to end the global glut.
He suggested that more coordination is needed to assess inventories and that in order to assess what the oil market needs in terms of inventory, one possible new measurement would be to determine how long existing inventories would meet demand, or forward-day cover.
Meanwhile, the current crude prices - which are a far cry from the doldrums of 2017 but far short of the $70-$80 range some optimistic analysts believe is possible later this year - is just fine as far as Alexander Novak, energy minister for Russia, is concerned: in an interview with Rossiya-24 state TV channel, he remarked that the $64 level is acceptable for his nation, and he added that prices might fluctuate between $50 and $70 per barrel in coming months.
Novak's outlook is distinctly neutral compared to the wildly bullish prices suggested by many analysts in recent weeks and the calamity forecast by those focused on fundamentals, a prime example of the latter being RBC Capital Markets earlier this week pointing out that supply is more than ample in many parts of the world, to the point where barrels are having difficulty finding buyers - which indicates that prices will drop substantially sooner than later.
