Resumption of Libyan output also supports a range bound forecast. File Image / Pixabay
As expected, the impressive recovery of U.S. refineries that were forced to close due to Hurricane Harvey caused crude to climb to a four week high on Wednesday, with West Texas Intermediate settling up at $49.16 and Brent finishing the session up at $54.20 per barrel.
Bart Melek, head of global commodity strategy at TD Securities, noted that the resumption of refining "implies that we are not going to get these great accumulations of inventory in oil as some had thought"; however, prices still remain range bound.
And range bound they will remain for some time, say a variety of experts, including Essam al-Marzouk, oil minister for Kuwait: he told media that he expects oil prices to stay between $50 and $55 per barrel, and that steadily increasing demand will result in a market rebalance by the end of this year.
Bart Melek, TD Securities
We are not going to get these great accumulations of inventory in oil as some had thought
Todd Colvin, senior vice president at Ambrosino Brothers, told Bloomberg television that the current oil trade is stemming from rising demand out of Asia and the possibility that the Organization of the Petroleum Exporting Countries (OPEC) may extend its production cuts past March of 2018; these and other factors, he said, will result in a crude ceiling of$50 - and only "an unforeseen geopolitical event" or "a really sharp increase" in demand will cause a move upward.
Colvin added that more likely the mega-storms pummeling southeast U.S. will result in prices sinking towards $46 "before too long."
Another factor that could ensure that prices stay range bound is Libya: a source told Bloomberg that the country's largest oil field has resumed production after a halt of more than two weeks, thanks to government reaching a final agreement with a militia group that had shut down operations.
Bloomberg estimates that Libya's output had reached a four-year high of 1.01 million barrels in July, and that resumption of activities will put "pressure on OPEC and other producers seeking to rein in a global supply glut and firm up prices."
If nothing else, though, Wednesday's relatively strong market showing demonstrates once again that the prognostications of analysts - which in turn influence traders - easily turn on a dime: just last week, experts monitoring the devastation caused by Hurricane Harvey warned of a huge buildup in inventory.