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U.S. oil prices hit highest since 2014, but analysts warn of overheated mkt

Reuters  |  SINGAPORE 

By Gloystein and Roslan Khasawneh

(Reuters) - U. S. prices hit their highest since 2014 on Wednesday due to ongoing production cuts led by OPEC as well as healthy demand, although analysts cautioned that markets may be overheating.

A broad market rally, including stocks, has also been fuelling investment into crude futures.

U. S. Intermediate (WTI) crude futures were at $63.44 a barrel, 48 cents, or 0.8 percent, above their last settlement at 0752 GMT. Earlier prices rose to as much as $63.53, the highest since Dec. 9, 2014.

Brent crude futures were at $69.11 a barrel, 29 cents, or 0.4 percent, above their last close.

Brent touched $69.29 in late Tuesday trading, the most since May 2015. Most market participants see the price high that day as an outlier and are measuring the gain as the most since Dec. 5, 2014, when prices rose to as high as $69.82.

"The extension of the OPEC agreement ... and declining inventories are all helping to drive the price higher," said William O'Loughlin, at Australia's

In an effort to prop up prices, the Organization of the Petroleum Exporting Countries (OPEC) together with and a group of other producers last November extended an output cut deal that was due to expire in March this year to cover all of 2018.

The cuts, which have mostly targeted and North America, were aimed at reducing a supply overhang that had dogged markets since 2014.

The said late on Tuesday that crude inventories fell by 11.2 million barrels in the week to Jan. 5, to 416.6 million barrels.

This came as the (EIA) raised its 2018 world demand growth forecast by 100,000 barrels per day from its previous estimate.

Official EIA stocks data is due at 1530 GMT on Wednesday.


Amid the general bull-run, which has pushed up crude prices by more than 13 percent since early December, there are indicators of an overheated market.

In the United States, crude production is expected to break through 10 million barrels per day (bpd) this month, reaching levels only and have achieved.

In Asia, the world's biggest consuming region, refiners are suffering from high prices and ample fuel supplies.

"One area of concern, particularly in Asia, is that of (low) refining margins ... This drop in margins could reduce Asian refiners' demand for incremental crude in the near term and weigh on prices," said Sukrit Vijayakar, director of Trifecta.

Average refinery margins this week fell below $6 per barrel, their lowest seasonal value in five years, due to high fuel availability but also because the recent rise in feedstock crude prices dented profits.

Asian prices are higher than in the rest of the world.

While Brent and WTI are still below $70 per barrel, the average price for Asian crude grades has already risen above that level, to $70.62 per barrel, Eikon data showed.

(Reporting by Gloystein and Roslan Khasawneh; Editing by and Richard Pullin)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, January 10 2018. 13:46 IST