Energy
0

Oil Eases After Hitting $51

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City.Traders work on the floor of the New York Stock Exchange (NYSE) in New York City.

Brent crude oil prices were lower on Friday after rising above $51 a barrel to an eight-week high, capping a rally driven by speculation producers could agree to measures to support crude.

International benchmark Brent crude oil futures were trading down 22 cents from Thursday's $50.67 per barrel. Brent earlier hit $51.22. US West Texas Intermediate crude futures were up 9 cents to $48.13 a barrel, after earlier rising as high as $48.75, CNBC reported.

Both benchmarks have risen 15% in the last six sessions amid comments by officials from crude-producing nations that they will discuss intervening in markets when they meet next month on the sidelines of a previously scheduled gathering in Algeria.

"Oil prices climbed higher because of the US crude stocks downtrend and positive market sentiment, led by OPEC talks. Oil ETFs [exchange-traded funds] and managed money also continued to bet on the oil rise recently," a Hong Kong-based trader said.

US crude was also pushed up by an open arbitrage opportunity to export WTI to Europe, leading to a rush of new orders.

However, analysts and traders warned the rally was overblown, especially since planned talks between the Organization of Petroleum Exporting Countries and other major producers like Russia to rein in ballooning overproduction were unlikely to lead to a reduced supply overhang.

"Some believe—or more appropriately, hope—that OPEC may come up with a plan to support prices at its informal meeting next month, something which we doubt will happen," said Fawad Razaqzada, a market analyst at Forex.com.

The market appeared to be approaching overbought territory, a Singapore-based trader said.

"Prices could potentially rise another $1 to $2 a barrel before they fall, but the market will need a catalyst to spark the selloff," the trader said.

Morgan Stanley, American financial services firm, argued in statement that fundamentals are not a key reason for the recent price bounce.

"Crude oil demand is anemic, gasoline demand has decelerated globally and China crude oil imports are likely to decelerate [in the second half of 2016]," the bank said, adding that supply appears set to surprise to the upside in a number of countries.

Financialtribune.com