On Wednesday, crude oil prices reached fresh multi-year highs supported by OPEC-led production cuts and healthy demand, but analysts are concerned of the chance of possible a overheating.
The wide ranging global market rally has been driving investments into crude oil futures. U.S. West Texas Intermediate (WTI) crude futures were at $63.60 a barrel, up 64 cents, at 1259 GMT. Earlier in the session, it rose to $63.67, the highest seen since Dec. 9, 2014. Brent crude futures were at $69.33 a barrel, 51 cents higher than their last session. Earlier in the session, Brent hit $69.37, its highest since May 2015.
“We’re still drawing U.S. stocks and that continues to support a very positive sentiment,” said Olivier Jakob, oil analyst, noting that physical Brent was above $70 per barrel. “It will trigger some increased discussion within OPEC,” Jakob added.
The Organization of the Petroleum Exporting Countries (OPEC), together with Russia and a group of other top producers, who last November extended an output-cutting deal to extend to the end of this year. The supply restrictions were aimed to reduce the global supply excess that has weighed down the oil markets since 2014.
Some producers have concerns that the present price gains could prompt shale companies to take over the market. Next month, U.S. crude oil production is anticipated to reach 10 million barrels per day (bpd), only top producers Russia and Saudi Arabia have higher levels.
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Tuesday’s data from the American Petroleum Institute d revealed that U.S. crude inventories fell by 11.2 million barrels in the week to Jan. 5. On top of that, the U.S. Energy Information Administration (EIA) has increased its 2018 world oil demand growth forecast by 100,000 bpd from its previous forecast. The official EIA stocks data is due on Wednesday at 1530 GMT.
Since early December, oil prices have increased over 13 percent and according to analysts there are indications of overheating. Analysts voiced their concerns that the market is ignoring the increase of U.S. production which is placing it in serious danger.
“Selective perception is the reason why the market is completely ignoring this just now,” analyst Carsten Fritsch said regarding the rise of U.S. production. “Attention is paid only to news that tallies with the picture of rising prices.”