Crude rose above $55 a barrel to hit a 16-month high yesterday as rising prospects of a tightening market after last week’s Organization of the Petroleum Exporting Countries (Opec) agreement to cut production gave speculators impetus to increase bets on higher prices.
Yesterday’s gains take the rally since the Opec deal was struck last Wednesday to 19% for Brent and 16% for US crude.
Last week’s 12.2% rise was the largest one-week increase since February 2011.
“Opec sentiment continues to support oil markets,” said Hans van Cleef, senior energy economist at ABN Amro, Amsterdam.
“Speculative short positions are still at elevated levels and as more traders unwind these positions they could trigger more support for oil prices.”
Weekly data from the InterContinental Exchange yesterday showed investors had raised net long positions on Brent to the highest level in four weeks.
After Opec agreed to curb production by 1.2m barrels per day (bpd) from January, eyes have turned to a meeting this weekend between Opec and non-Opec producers to expand the deal.
Non-Opec producers are expected to agree to add an output cut of 600,000 bpd in Vienna on December 10.
“We remain sceptical that non-Opec producers will line up to pledge their own reductions when Opec’s announcement last week already largely took responsibility for rebalancing the market,” said Tim Evans, energy futures specialist with Citigroup in New York.
“In our view, the rally in prices represents an economic call for more production, not more cuts.”
Transneft, Russia’s pipeline monopoly, yesterday a cut to oil output could begin in March. Iran will also attend the meeting.
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