Bullish signals are becoming entrenched in the global crude oil market data, sending crude oil prices toward $60 per barrel. File photo by Monika Graff/UPI |
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Oct. 24 (UPI) -- Bullish signals emerging Tuesday sparked only a minor rally in oil prices as traders wait to see what pans out in the actual weekly supply and demand figures.
The Organization of Petroleum Exporting Countries implemented an agreement in January aimed at draining the surplus from the five-year average in global crude oil inventories through coordinated production declines. Saudi Arabia has adopted a strategy of doing "whatever it takes" to balance the market and signs are emerging that the agreement could be extended well into next year.
OPEC during the weekend said overall compliance with the agreement was more than 100 percent, meaning parties to the agreement were cutting more than necessary.
"In other words, OPEC is on the verge of accomplishing their goal of ridding the world of the oil supply glut and will create an environment for higher prices soon," Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in an emailed market report.
The price for Brent crude oil was up 0.70 percent at 9:20 a.m. EDT to $57.73 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.94 percent to $52.39 per barrel.
Traders are looking to the string of data this week on oil and gasoline supplies in the United States, the world's largest economy, to get a better indication of balance.
A survey of analysts from commodity pricing group S&P Global Platts said last week should show a draw on crude oil inventories of 425,000 barrels and a decline in gasoline stocks of 2.3 million barrels, suggesting supply-side strains are quickly evaporating.
"A likely draw last week of U.S. stocks of crude oil, gasoline and distillates would represent the first across-the-board decline since the week ending July 28, likely sending a bullish message to traders that could nudge oil futures higher," the emailed report read.
Oil Futures Editor Geoffrey Craig said crude oil prices were previously stuck in a lower range because of "mixed signals" coming in response to official data provided by the U.S. Energy Information Administration, which publishes its results on Wednesday mornings.
"If [the survey data are] confirmed, that would help offset the bearish pressure stemming from EIA data the week prior that showed builds in gasoline and distillate stocks, despite a plunge in refinery activity," he said.
Elsewhere, a report from IHS Markit finds some capital streams may be drying up in deep waters as investors look for opportunities in shale basins in the United States, where Flynn said he saw declining potential because many had viewed U.S. shale as balancing OPEC's production cuts.
"The reality of shale economics and falling production per well has proven that at least right now, the shale oil producers were not up to the task," he said.
