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Oil price steady near two-year high as geopolitical issues offset US supply

US producers added nine oil rigs in the week to November 10, the biggest jump since June, raising the count to 738, energy services firm

Reuters  |  LONDON 

Oil price steady near two-year high as geopolitical issues offset US supply

Oil was largely steady on Monday, trapped between a bullish push from tension in the and downward pressure from the evidence of rising production, although record fund bets on a rally kept the price in sight of two-year highs.

Brent crude futures were down 17 cents at $63.35 a barrel by 1002 GMT, having gained 14 per cent so far this month. (WTI) crude eased 6 cents to $56.68.

Traders said crude prices were generally well supported as output cuts led by the Organization of the Petroleum Exporting Countries and have contributed to a significant reduction in excess supplies that have dogged markets since 2014.

The excess of industrialised countries' oil stockpiles over their five-year average "has fallen by more than 50 per cent in 2017, with inventories currently at around 160 million barrels", consultancy Timera Energy said.

"If current trends continue, inventories are likely to return to the five-year average at some stage in 2018," it said, adding that strong demand had also helped reduce the glut.

Hedge funds increased their holdings of Brent crude futures and options in the latest week, pushing their bet on a sustained rally in the oil price to the highest on record. [O/ICE]

Money managers now hold a net long position in Brent futures and options equivalent to nearly 544 million barrels of oil.

"Overall, there are a few reasons for confidence - compliance from - and it seems likely they'll extend the cut," Jasper Lawler, a market strategist with London Capital Group, said.

On the supply side, tensions in the raised the prospect of disruptions, traders said, adding it was unclear whether a strong earthquake that hit and on Sunday had affected the region's oil production.

said over the weekend that an explosion that caused a fire at its main oil pipeline on Friday was caused by sabotage, linking the attack to Iran, which denied any role.

The rise in WTI futures towards $60 last week brought an increase in drilling. producers added nine oil rigs in the week to November 10, the biggest jump since June, raising the count to 738, energy services firm Baker Hughes said on Friday.

The rig count is also much higher than a year ago, when only 452 rigs were active, indicating that the oil industry is comfortable operating at current prices.

 

 

First Published: Mon, November 13 2017. 16:43 IST
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