Oil prices edge up from multi-year lows
LONDON: Oil prices rose slightly on Tuesday, bouncing off 11-year lows as investors closed bearish positions ahead of the year-end holiday but global oversupply capped gains.
Brent futures traded up 17 cents at $36.52 a barrel at 1047 GMT, recovering from an 11-year low of $36.04 hit on Monday. U.S. West Texas Intermediate (WTI) crude futures were 32 cents higher at $36.13 a barrel, up from 2009 lows of $33.98 hit in the prior session.
“The sentiment has been very negative and ahead of the holidays people tend to close some of the speculative positions,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam. “Therefore we could see some upside potential in oil prices.”
Brent crude prices were set to make the first daily gains in five sessions, while WTI futures rose to the highest level in four sessions.
Saudi Arabia, the world’s largest oil exporter, said it had shot down a ballistic missile that was heading toward its city of Jizan, where a new refinery and oil terminal are under construction. Saudi Aramco said all its facilities in the area were “in safe and normal operations”. However, concerns about supply continuing to outstrip demand next year kept gains limited.
“We view the oversupply as continuing well into next year before rebalancing in the fourth quarter 2016,” Goldman Sachs said in a report circulated on Tuesday.
“Our base case remains that the global oil stock build will on aggregate remain shy of storage capacity, although the storage buffer has once again narrowed,” the bank said.
It added that a higher-than-expected 1.5 million barrels a day global market imbalance in this quarter is likely to extend into the first half of 2016 because of milder than usual weather weighing on demand.
The weather provided a further bearish element as an unusually mild start to the winter in the northern hemisphere dents heating oil demand.
BNP Paribas said the number of U.S. and European heating days had been 30 percent and 39 percent below the 10-year average since Dec. 7, respectively, and that days requiring heating were expected to remain 23-24 percent below normal until Jan. 4.
Russian oil output has reached a post-Soviet era high but Energy Minister Alexander Novak said in an interview to Kommersant news daily published on Tuesday that Russian oil production may start declining in 2017 if a tough taxation regime continues.
North Sea production from Britain and Norway is expected to rise this year due to new fields coming on stream and lower-than-usual maintenance outages, according to analysts at JBC Energy.