Published: Wed, June 28, 2017
Global Media | By Garry Long

Crude oil prices extend bounce off 10-month lows

Crude oil prices extend bounce off 10-month lows

Oil futures advanced on Tuesday, putting crude on track for its fourth up session in a row, as traders braced for a possible decline in USA supplies.

Brent crude futures were up 25 cents, or half a percent, at $45.79 a barrel by 1:13 p.m. (1713 GMT), still set for a near 20 percent drop in the first half of the year.

The Organization of Petroleum Exporting Countries (OPEC) agreed to cut output by 1.2 million barrels per day in November as part of an effort to reduce the crude supply glut.

However, Nigeria and Libya have raised output.

Meanwhile, U.S. shale oil output has risen about 10 per cent since last year to 9.4 million bpd, with the number of U.S. oil rigs in operation at the highest in more than three years.

A report emailed from S&P Global Platts said the analysts it surveyed are expecting US crude oil inventories to decline by 3.25 million barrels and gasoline stocks could drop 900,000 barrels. "It will depend on the weekly USA inventory data".

"Three days of price action has been interesting, it has been short covering", said Ric Spooner, chief market analyst at CMC Markets in Sydney.

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Commerzbank said in a research note was quoted by the news agency as saying: "Short-term financial investors also significantly scaled back their net long positions in Brent on the ICE last week. and find themselves at their lowest level in a year and a half".

The gains had additional support from bargain hunters who stepped in after crude futures.

On June 24, 2016, a day after the Brexit vote, Brent crude oil futures plunged almost 4.9%. The benchmark was still set to end the first half of the year down almost 20 percent. "Just as a floor appears to be coming in near $40, I think there is also a ceiling in the $50-55 area because higher prices encourage more USA production and exploration".

"The perception is that we're going to have slower exploration activity, but the amount of drilling that we've been doing is going to guarantee production growth for at least another four or five months", said James Williams, president of energy consultant WTRG Economics in London, Arkansas, "So you've still got the downward pressure there".

"Therefore, I tend to think $40 to $42 from a West Texas Intermediate point of view should be the lower end of the current range". Non-OPEC nations must also cut production in order to reverse the supply glut.

US shale oil output is up around 10 percent since last year, with the number of USA oil rigs in operation at the highest in more than three years. The production has increased by 922,000 barrels per day since bottoming around last July.

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