Oil Prices Steady as Market Awaits OPEC Action
October 17 2016 - 8:40AM
Dow Jones News
LONDON—Crude futures were steady Monday on a stronger dollar,
another weekly U.S. oil-rig count rise and market belief that any
momentum gained from OPEC's agreement to cut production has now
been priced in.
The November contract for global benchmark Brent crude was down
0.04% at $51.91 a barrel, while its U.S. counterpart West Texas
Intermediate fell 0.3% to $50.20 for November deliveries.
Morgan Stanley said in a note that positive sentiment has been
engulfing the market since the announcement to cut crude output
from the Organization of the Petroleum Exporting Countries was made
in September. It added that this alone should be enough to keep
prices in the $48-$53 a barrel bracket until the official meeting
takes place in Vienna on Nov. 30.
Commerzbank pointed to the growing number of net long positions,
a market term for a commodities contract that expects prices to
rise, as proof that traders are expecting higher prices. However,
it added that the situation could change quickly.
"Whether investors will stick to their guns will depend
primarily on whether OPEC maintains the credibility of its
announced production cuts," Commerzbank analysts said in a
note.
Other observers said that while short-term support for the oil
market will come from the OPEC meeting, the medium term will be
determined by how far any production cuts will go.
The Riyadh-based Jadwa Investment said that a disciplined
implementation of cuts that would peg back OPEC supply to 32.5
million barrels a day could push prices to $60 a barrel by early
2017. However, it added that any fudging of the issue would result
in a brutal correction of prices with the possibility of them
sinking below $40 a barrel before the end of 2016.
Meanwhile in the U.S., the oil-field services company Baker
Hughes reported that oil rig count increased by four last week. Rig
counts are generally viewed as a proxy for activity in the U.S. oil
sector and observers believe that as prices stay above $50 a
barrel, the number could increase further in the coming weeks.
This week sees a return to normal for U.S. crude inventory
reports after last week's Columbus Day holiday. Industry body the
American Petroleum Institute releases its forecast Tuesday, with
official data following on Wednesday from the Energy Information
Administration. Volatility is expected around both statements.
Nymex reformulated gasoline blendstock futures—the benchmark
gasoline contract was up 0.09% at $1.49 a gallon, while diesel
futures traded at $1.56, 0.33% lower.
ICE gas oil futures changed hands at $465 a metric ton, up
0.43%.
Write to Kevin Baxter at Kevin.Baxter@wsj.com
(END) Dow Jones Newswires
October 17, 2016 08:25 ET (12:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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