On Friday, oil prices increased, becoming stable after five straight days of declines, although an increase in U.S. crude inventories and uncertainties over the ability of producers to coordinate productions reduction continued to keep a lid on the market.
Brent crude increased 13 cents, or 0.28%, at $46.48 per barrel at 0515 GMT (1:25 a.m. ET). U.S. West Texas Intermediate (WTI) futures increase 11 cents, or 0.25%, to $44.77.
In spite of the slight increases, traders said sentiment was bearish given the decline in prices over the past five days, it is the longest decline since June. Oil futures have shed over 13% since their recent peak in mid-October.
“The persistent market dynamic of softer demand and stronger supply will become a more dominant driver of prices as the impact of OPEC’s verbal interventions begins to fade and expectations for coordinated cuts are readjusted,” BMI Research said in a note to clients.
“We see a trading range of $43-53 per barrel leading oil markets into the new year and we maintain our forecasts of an average 55 per barrel and $53.5 per barrel for Brent and WTI respectively for 2017,” it added.
Analysts stated markets were also burdened by traders pulling out money from futures ahead of the U.S. presidential elections, which are perceived as a danger to markets.
“I suspect the main drivers are that risk is being taken off the table ahead of next week’s election,” said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.
Beyond worries in advance of the elections, traders stated oil fundamentals were also sluggish, with U.S. crude stocks increasing, demand development low, and uncertainties that the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producer Russia can approve on a meaningful output reduction this month.
Although oil output remains near records and inventories are high, British bank Barclays stated demand development was timid.
Demand growth over July-September was less than a third that of the year-ago quarter, Barclays said in a note, estimating last quarter’s growth below 1 million barrels per day (bpd).
Consumption increase for the last quarter will not be much higher, before averaging 1.3 million barrels per day (bpd) in 2017, it added.
In the United States, crude oil stockpiles increase over 14 million barrels the previous week, the largest build on record, emphasizing that a global fuel supply extension is far from over.
Furthermore, in the United States, the Colonial Pipeline carrying gasoline, which was interrupted this week by an explosion, is anticipated to resume Line 1 on Sunday afternoon.
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