SINGAPORE: Oil prices held steady on Thursday after falling late in the previous session, supported by ongoing supply cuts led by OPEC and Russia.
However, traders said a price rally that has pushed up Brent crude by over 40 percent since July may have run its course due to increases in US supplies and some indicators of a demand slowdown.
Brent futures LCOc1 were at $63.66 per barrel at 0246 GMT, up 17 cents, or 0.3 percent, from their last close, but about $1 off the over two-year high of $64.65 a barrel reached earlier this week.
US West Texas Intermediate (WTI) crude CLc1 was at $56.94 per barrel, up 13 cents, or 0.2 percent, but also some way off this week’s more than two-year high of $57.69 a barrel.
Key support was coming from efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to withhold supplies in order to tighten the market and prop up prices.
OPEC will discuss output policy during a meeting on Nov. 30, and it is expected the group will extend the cuts beyond the current expiry date in March 2018.
“With the OPEC/non-OPEC deal extension beyond March 2018 a certainty, prices may become stronger and temporarily reach the $65-$70 per barrel range in 2018,” said energy consultancy FGE.
Despite this, many analysts say the strong price rally of the past months has likely run its course, at least for now.
US crude stockpiles rose 2.2 million barrels in the week to Nov. 3, to 457.14 million barrels, the Energy Information Administration said on Wednesday, contrary to analysts’ expectations for a decrease of 2.9 million barrels.
US crude production inched up 67,000 barrels per day (bpd) to 9.62 million bpd, the highest on record.
On the demand side, global oil demand remains strong, although the latest figures from top importer China came in below expectations.
“At 7.34 million bpd, China crude oil imports dipped to the lowest level since October last year… The trend could continue for the rest of the year,” Barclays bank said, although it added that it expected demand growth to pick up again in 2018.
Key for the last weeks of the year is whether traders remain confident about their huge bets on further price rises, or whether they sell out of these positions, satisfied with recent strong gains.
“It doesn’t matter how bullish the fundamentals are … when an asset goes vertical there is always room for a pullback and consolidation of recent price moves. That’s where oil prices find themselves this morning,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.