Crude Firms and Consensus Grows Over Cleared Oil Glut

Aramco's international IPO is delayed until prices escalate even further. File Image / Pixabay

Crude prices on Wednesday once again climbed, but rising U.S. stockpiles and production capped the gains; and even though some experts think Brent will rise above $75 in the near future, rumours are that the highly anticipated international Initial Public Offering of Saudi Aramco will be delayed until an outright price rally occurs.

West Texas Intermediate finished Wednesday's session up 35 cents at $68.05 per barrel, while Brent settled 14 cents higher at $74 per barrel.

This was despite the Energy Information Administration reporting that crude inventories rose 2.2 million barrels in the week to April 20, instead of a 2 million barrel decrease as was widely expected; crude stocks at the Cushing, Oklahoma, delivery hub rose 459,000 barrels.

The modest gains on Wednesday were also despite preliminary data showing that weekly U.S. crude oil production also rose to nearly 10.6 million barrels per day (bpd); only Russia produces more, at nearly 11 million bpd.

While some analysts expressed dismay over Wednesday's performance, Stephen Brennock, strategist for PVM Oil Associates, said, "The prospect of a downside correction in prices is lost on the speculative fraternity; in fact, financial players have rarely felt more optimistic, [and] bets on rising crude prices are close to a near-record high.

"However, given the already vast holdings of long positions in oil, there are doubts over the scope for further inflows."

Saudi Arabia is one nation that is assured to be hoping Brennock's outlook is incorrect: CNBC reported that the international listing of Saudi Aramco, the world's largest oil company, is likely to be delayed until 2019, even though the state-owned firm is expected to list on the Saudi stock exchange in the second half of this year.

The reason is supposedly the expectation that crude will eventually climb to $80 per barrel.

Fadi Arbid, founding partner and chief investment officer at Amwal Capital Partners, sympathized with the Saudis' position: "Time is of the essence," he said, adding that "For a company, for which underlying commodity is oil, it would make a lot of sense to wait for that [price] rally - and if you believe that rally is expected to continue, I think you may as well wait."

Still, as Brennock suggested with regards to financial players, the Saudi gambit is controversial, especially considering compelling figures that place the forward curve for Brent above $70 until the end of 2018, and prices above $60 through 2020.

Although the current mood is bullish and fueled by positive crude outlooks from firms such as Goldman Sachs and Bank of America Merrill Lynch, it's tough to ignore contrary opinions from equally respected analysts such as Barclays, which last week held firm that the steadily increasing production of many nations in addition to the U.S. will cause prices to collapse later this year and stay low into 2019.