Commodity Tips, Oil prices close to mid-2015 highs, but doubts over further rises loom
Oil prices were stable on Wednesday, not far off mid-2015 highs reached the previous session, as strong demand and ongoing efforts led by OPEC and Russia to curb production tightened the market. US West Texas Intermediate (WTI) crude futures were at $60.40 a barrel at 0141 GMT, up 3 cents from their last close, and not far off the $60.74 June 2015 high reached the previous day.
Brent crude futures - the international benchmark for oil prices - were at $66.55 a barrel, down 2 cents but still not far off the $67.29 May 2015 high from the previous day. Despite this, there were indicators that markets had overshot in the last days of 2017 and trading this year, as US production is set to rise further and doubts are emerging about whether demand growth can continue at current levels.
Ole Hansen, head of the commodity strategy at Denmark's Saxo Bank warned that “multiple but temporary supply disruptions" like the North Sea Forties and Libyan pipeline outages (and) protests across Iran ... helped create a record speculative long bet.”
With the pipeline outages resolved and the protests in Iran showing no signs of impacting its oil production, Hansen said there was potential for a price downturn in early 2018, especially due to rising US output. “It is only a matter of time before the 10 million barrel per day (bpd) production target will be reached,” Hansen said.
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