Remarkably, $US70 a barrel for oil is no longer a dream in the current market surge, but what is even more astounding is that analysts are now saying it is possible by the end of the year.
That was unthinkable a week or so ago: now it is being taken seriously.
Analysts at Bank of America Merrill Lynch saying on Monday it was possible Brent could see a “cyclical peak” of $US75 a barrel in the near future.
Brent crude hit a two-year high of $US64.05 a barrel overnight Monday, taking the gains since June to more than 40% and defying those analysts who said oil rices would struggle to rise above $US60 a barrel.
December West Texas Intermediate crude was up more than 3% to around $US57.60 a barrel.
It settled at $US57.35 a barrel, up more than 3% and its highest settlement since late June of 2015, according to US financial data group, FactSet. Oil’s rise and the obvious tensions in Saudi Arabia say gold go charging higher – up around $US12 an ounce and off three month lows reached on Friday.
The price was around $US1,281 an ounce in early Asian dealings this morning, despite a rise in the value of the US dollar. The Aussie dollar was around 77.65 US cents.
Global iron ore prices leapt as well – up nearly 6% in a day to $US63.36 a tonne cfr Qingdao, according to the Metal Bulletin. That was up $US3.48 a tonne or 5.8%.
The sharp rise in oil, gold and iron ore should see a solid start to trading on the ASX this morning after yesterday’s 6 point fall and weak session overall. The overnight futures market has a 20 plus point rise pencilled in.
But the driver has been the continuing rise in oil prices. In fact US crude prices have averaged almost $US50 a barrel so far in 2017, well above 2016’s $US43.47 average.
US oil production dipped to 9.2 million barrels per day (bpd) in August, from just over 9.3 million according to the US Energy Information Administration. But it is still well above the 8.716 million barrels a day a year ago. The rising price of crude reflects Opec’s output cuts and booming demand as the world enjoys near-synchronised economic growth.
Events in Saudi Arabia — the largest producer in Opec — are also driving prices higher – specifically the arrests of at least 11 Saudi Arabian princes and dozens of senior officials and businessmen at the weekend raising.
Analysts wonder whether this signals a spillover of tensions into the oil market, especially is there is some sort of power play at work in the Saudi royal family.
In the US, shale producers — who helped end the $US100 a barrel oil era in 2014 — seem to be easing off the pace, with the number of rigs drilling for crude falling in recent months, as companies focus on boosting profitability. Last week’s fall of 8 was the largest 18 months – since May 2016 and the total figure of 11 (including 4 gas rigs) was the largest for the year so far.
The number of oil rigs in use at 729 is the lowest figure since May of this year. But it is still higher than a year ago when the number was just 450.
