On Tuesday, the price of oil climbed higher reaching its highest level seen since May 2015, propped up by OPEC-led production cuts and the belief that U.S. crude inventories have fell the eighth week in a row.
The Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia are extending the supply cuts through 2018, the second full year of restriction, to reduce the excess in the oil inventories. Brent crude gained 18 cents at $67.96 per barrel by 11:08 a.m. EST and earlier in the session touched $68.29, its highest since May 2015. U.S. West Texas Intermediate crude (WTI) gained 36 cents to $62.09 and reached its highest since May 2015 as well at $62.56.
“We expect oil demand growth to outpace non-OPEC supply growth in both 2018 and 2019,” analysts stated. “In our view, the back of the Brent and WTI curves are both still under priced. We do not think that prices below $65 per barrel are sustainable into the medium term.”
This week’s supply reports from the American Petroleum Institute and the U.S. government’s Energy Information Administration are predicted to reveal that U.S. crude stocks dropped by 4.1 million barrels, an eighth week of decline. The API releases its data on Tuesday at 4:30 p.m. EST and the government report is scheduled for Wednesday at 10:30 a.m.
Some analysts are concerned that the potential rise in U.S. shale oil production will put a damper on things for OPEC and Russia to keep their end of the deal to restrict supply until the end of 2018 on the fear of losing a share in the market.
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“I am now on the lookout for bearish technical patterns to emerge on oil prices as I believe they will struggle to go north of $65-$75 per barrel given the above fundamental consideration,” said Fawad Razaqzada, technical analyst.
“If WTI were to go back below the 2017 high of $60.48, which was hit late in the year, and the 2018’s opening price of $60.09, then the technical outlook would turn bearish on oil. But for now, the bullish trend remains intact as prices remain above key supports.”