Are Oil Prices In Danger?
On Monday, oil prices dropped almost 2%, re-tracing from last week’s rally built on signals the global market is starting to re-stabilize from chronic surplus. Brent crude futures LCOc1 dropped 2 percent, or $1.07, at $51.65 a barrel as of 12:01 p.m. EDT after hiking more than 3 percent on Friday. U.S. West Texas Intermediate crude futures CLc1 declined 1.9 percent, or 90 cents, to $47.63 a barrel. The contract had also increased 3 percent in the last session.
“We are currently seeing some profit-taking after Friday’s strong rally ahead of this week’s inventory data,” stated Hans van Cleef, senior energy economist at ABN Amro.
“Fresh uncertainty about inventories and OPEC compliance (with agreed production cuts) could be enough reason to sell some of the long positions.”
U.S. hedge funds and money managers have already begun trimming wages on increasing prices, with Commodity Futures Trading Commission data displaying on Friday that investors had cut bullish bets on U.S. crude for a second consecutive week.
The world remains oversupplied with oil despite a deal struck by some of the world’s largest producers to cut output. Hiking U.S. production has been a key factor keeping supply and demand from balancing. There are signs that U.S. output may soon ease, as energy companies reduced rigs drilling for new oil for a second week in three, energy services firm Baker Hughes reported on Friday.
The oil minister of Kuwait, which is participating in OPEC-led production cuts, reported U.S. crude stocks were dropping more than anticipated because output cuts were happening.
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