Oil Prices Hold Gains on Tighter U.S. Stocks, Global Supply

By Christopher Alessi Features Dow Jones Newswires

Crude prices ticked up Monday morning, holding on to robust gains made last week on tighter stocks in the U.S. and perceived risks to global supply.

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Brent crude, the global benchmark, was up 0.25% at $67.78 a barrel on London's Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.54% at $61.77 a barrel.

Prices climbed to near three-year highs last week amid antigovernment protests in Iran, declining U.S. crude stockpiles and freezing winter weather in the U.S. Northeast and continued high levels of compliance with the Organization of the Petroleum Exporting Countries' plan to cut crude output, according to analysts at Commerzbank.

OPEC and 10 producers outside the cartel, including Russia, agreed late last year to extend an accord to hold back crude output by nearly 2% through the end of this year. The deal was first reached at the end of 2016 with the aim of reining the global supply glut and boosting prices.

"Against this backdrop, speculative financial investors are betting on further price rises," with net long positions in Brent rising to a record-high 560,890 contracts last week, the analysts wrote in a note Monday. But, the analysts cautioned, this "increases the potential for correction once the factors that are currently determining prices move out of focus or disappear."

Another factor that could undermine the price rise is steadily increasing U.S. crude production, analysts say.

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"The march higher in U.S. crude supply will, therefore, likely cast an ever-increasing shadow over the prevailing bullish sentiment," according to Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd.

Michael Hewson, chief market analyst at brokerage CMC Markets, said "the uptrend we have seen since pretty much the middle of the summer is pretty much still intact." He added that the cold weather in the U.S. is likely to continue to fuel demand for energy in the coming weeks.

The price of Brent is up roughly 50% since last June.

Among refined products, Nymex reformulated gasoline blendstock--the benchmark gasoline contract--was up 0.11%, at $1.78 a gallon. ICE gas oil, a benchmark for diesel fuel, changed hands at $608.00 a metric ton, up 0.50% from the previous settlement.

Write to Christopher Alessi at christopher.alessi@wsj.com

Crude prices were mixed Monday morning, struggling to hold on to robust gains made last week on tighter stocks in the U.S. and perceived risks to global supply.

U.S. crude futures recently traded up 9 cents, or 0.15%, to $61.53 a barrel on the New York Mercantile Exchange. Brent, the global benchmark fell 1 cent to $67.61 a barrel on ICE Futures Europe.

Prices climbed to near three-year highs last week amid antigovernment protests in Iran, declining U.S. crude stockpiles, freezing winter weather in the U.S. Northeast and continued high levels of compliance with the Organization of the Petroleum Exporting Countries' plan to cut crude output.

"Against this backdrop, speculative financial investors are betting on further price rises," with net long positions in Brent rising to a record-high 560,890 contracts last week, the analysts wrote in a note Monday. But, the analysts cautioned, this "increases the potential for correction once the factors that are currently determining prices move out of focus or disappear."

Some of the factors that pushed crude higher at the end of last year are starting to dissipate: production in the North Sea has resumed following the repair of the Forties Pipeline System. Production at the Waha Oil joint venture in Eastern Libya has also returned to its normal level after a pipeline that had been sabotaged was repaired, the company said on a statement last week.

"The market has to prove it belongs at this price," said Donald Morton, vice president at Herbert J. Sims & Co., who runs an energy trading desk. "There's no jitters in the market this morning."

Higher inventories of gasoline and diesel, as well as the prospect of greater oil production from the U.S., could keep a lid on prices, analysts said.

"The march higher in U.S. crude supply will, therefore, likely cast an ever-increasing shadow over the prevailing bullish sentiment," according to Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd.

But the number of rigs drilling oil wells in the U.S. dropped by five last week, according to oil-field services firm Baker Hughes, helping bolster prices Monday.

Gasoline futures were roughly unchanged at $1.7857 a gallon. Diesel futures ended down 0.43% to $2.0499 a gallon.

Write to Alison Sider at alison.sider@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

Crude prices rose Monday, holding on to robust gains made last week on tighter stocks in the U.S. and perceived risks to global supply.

U.S. crude futures rose 29 cents, or 0.47%, to $61.73 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 16 cents, or 0.24%, to $67.78 a barrel in ICE Futures Europe.

Prices climbed to near three-year highs last week amid antigovernment protests in Iran, declining U.S. crude stockpiles, freezing winter weather in the U.S. Northeast and continued high levels of compliance with the Organization of the Petroleum Exporting Countries' plan to cut crude output.

The move higher paused on Friday but resumed Monday, with prices just shy of the highs hit last week.

"Speculative financial investors are betting on further price rises," with net long positions in Brent rising to a record-high 560,890 contracts last week, analysts at Commerzbank wrote in a note Monday. But, the analysts cautioned, this "increases the potential for correction once the factors that are currently determining prices move out of focus or disappear."

"At plus-$60 levels you need more information to support higher prices," said Gene McGillian, price risk manager at Tradition Energy. "With all the length in the market you get any factor that looks to be changing the tone, you have to be careful of a reversal.

Some of the factors that pushed crude higher at the end of last year are starting to dissipate: production in the North Sea has resumed following the repair of the Forties Pipeline System. Production at the Waha Oil joint venture in Eastern Libya has also returned to its normal level after a pipeline that had been sabotaged was repaired, the company said on a statement last week.

"The market has to prove it belongs at this price," said Donald Morton, vice president at Herbert J. Sims & Co., who runs an energy trading desk. "There's no jitters in the market."

Higher inventories of gasoline and diesel, as well as the prospect of greater oil production from the U.S., could keep a lid on prices, analysts said.

"The march higher in U.S. crude supply will, therefore, likely cast an ever-increasing shadow over the prevailing bullish sentiment," according to Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd.

But the number of rigs drilling oil wells in the U.S. dropped by five last week, according to oil-field services firm Baker Hughes, helping bolster prices Monday.

Gasoline futures rose 0.6 cent, or 0.34%, to $1.7918 a gallon. Diesel futures fell 1.33 cents, or 0.65%, to $2.0454 a gallon.

Write to Alison Sider at alison.sider@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

(END) Dow Jones Newswires

January 08, 2018 15:27 ET (20:27 GMT)