Oil prices extend gains on hopes of easing oversupply
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NEW YORK, United States—Global oil prices extended gains Tuesday, hitting one-month highs on hopes for an easing of the global oversupply of crude.
US benchmark West Texas Intermediate for delivery in November jumped $2.27 to $48.53 a barrel on the New York Mercantile Exchange, its highest level since late August.
Brent North Sea crude for delivery in November closed at $51.92 a barrel in London on a gain of $2.67.
John Kilduff of Again Capital said that the US Department of Energy’s latest short-term energy outlook report on Tuesday appeared to spark the rally.
“They see oil production down 120,000 barrels per day in September versus August, so that’s a big drop,” Kilduff said.
For 2016, the DoE forecast US production would fall to an average of 8.9 million barrels per day, from 9.2 million in 2015. “It definitely caught the attention of the market,” he said.
Traders were awaiting the DoE weekly report on US commercial crude inventories, a closely watched indicator of demand in the world’s top consuming nation.
Wednesday’s report is expected to show inventories rose by two million barrels in the week to October 2, according to a Bloomberg News survey.
Oil prices, which tumbled in August to six-year lows under pressure from strong global output, have been slowly climbing back up.
“Oil prices have been supported by a number of factors lately, including… a slightly weaker US dollar, the positive vibes arising from the rebounding stock markets, and Russia’s military actions in Syria which has increased supply-side risks in the Middle East region,” said analyst Fawad Razaqzada at traders Gain Capital.
“But above all, it is expectations that US shale oil output is going to start shrinking soon, making the crude market more balanced.”
Royal Dutch Shell chief executive Ben van Beurden expressed cautious confidence in a price rebound.
“I see the first mixed signs for recovery of oil prices,” van Beurden said at the annual Oil & Money event in London.
“But with US shale oil being more resilient than we originally thought and a lot of oil still in stock, it will take some more time to rebalance demand and supply.”
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