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Oil hits new two-and-a-half year highs
January 04, 2018
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LONDON: Oil prices rose on Wednesday to new two-and-a-half year highs as robust output in the United States and Russia balanced tensions from a sixth day.

US West Texas Intermediate (WTI) crude futures were at $60.87 a barrel at 1241 GMT, up 49 cents from their last close and their highest level since June 2015.

Brent crude futures - the international benchmark for oil prices - were at $67 a barrel, up 43 cents but still trailing Tuesday’s high of $67.29 that was the most since May 2015.

Carsten Fritsch, an analyst at Commerzbank, warned that prices faced a correction as support lent by unrest in Iran will weaken unless the situation begins to affect oil production, which is not yet the case, or the United States re-imposes sanctions.

“It’s surprising that prices remain at such elevated levels near two-and-a-half year highs despite the main cause of the recent rally disappearing,” Fritsch said, referring to the restart of the North Sea Forties pipeline system.

Commerzbank predicts Brent will see out 2018 at $60 a barrel.

Traders said markets had recently overshot as US production is set to rise further and doubts are emerging about whether demand growth can continue at current levels.

Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, warned “multiple but temporary supply disruptions” like the North Sea Forties and Libyan pipeline outages helped create a record speculative long bet.” With the pipeline outages resolved and the protests in Iran showing no signs of affecting its oil production, Hansen said there was potential for a price downturn in early 2018, especially due to rising US output.

“It is only a matter of time before the 10 million barrel per day (bpd) (US) production target will be reached,” Hansen said.

Supplies were healthy. US oil production has risen by almost 16 per cent since the middle of 2016, hitting 9.75 million bpd at the end of last year.

Agencies

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