Oil prices hit $65 for first time in years

Jan 27, 2018, 16:44
Oil prices hit $65 for first time in years

Besides, ample stocks position following higher supplies from producing regions too fuelled the downtrend.

In foreign exchange markets, the US dollar hit its lowest level since December 2014 against a basket of other leading currencies.DXY.

West Texas Intermediate crude oil climbed above the $65 mark for the first time in more than three years on Wednesday.

"Our bearish view on oil markets is driven by concern that supply growth could outpace demand this year", he says. At that level, USA production would decisively top Saudi production and rival Russian Federation.

Thanks to a combination of broad-based U.S. dollar weakness, expectations for stronger global growth, ongoing production limits from OPEC and non-OPEC producers and signs that global crude markets are tightening, Brent crude - the global benchmark - now tops $70 a barrel, extending its rally from early 2016 to 161%. Its session high of $66.66 was also the highest since December 2014.

Murban crude, a light grade from Abu Dhabi, is now valued at a premium of 23 cents a barrel to its official selling and has traded at a premium for the past six months, the longest streak since 2016. Merrill also raised its outlook for U.S. crude to $60 a barrel from $52.

However, the current surge in prices is being generated by a record-breaking run of declines in U.S. crude inventories and a weaker U.S. Dollar.

2017 began with oil prices climbing in the $45-55 range to end the year near $67 a barrel.

Barrel is the unit of measurement of oil volume.

Oil retreated late on Thursday as the USA dollar rebounded from early losses and strengthened, denting support for the latest crude rally, but tight US supplies limited the commodity's decline. The contract also touched a new three-year high on Wednesday. But the greenback later slipped. That was still up 0.8 percent from the last settlement.

USA gold futures for February delivery settled up $2.10, or 0.2pc, at $1,339.20 per ounce. The dollar's earlier weakness had boosted oil prices.

"That view certainly has merit, with United States stockpiles below the 5-year average from 2013 to 2018 for this time of year", he says.

In particular, the industry body believes that gold will maintain its relevance as a strategic asset in 2018.

"With shareholders demanding better discipline on the use of operating cash flows and further access to debt markets drying up in the face of high leverage ratios, shale company executives have been increasingly promising more prudence, with a focus not on aggressive drilling campaigns but on ensuring better returns on equity, debt repayment and eventually cash returns to shareholders", Sarkar elaborates.

The factors picked out by the market development body, include higher global economic growth, interest rate hikes and restructuring of the U.S. balance sheet, overheated equity markets and increased access to gold through a variety of investment platforms.

Other factors that would steer the gold price and affect the global financial markets included the normalising of global economic growth, with expanding USA and European Union economies; and the switching of the Chinese economy from investment-driven growth to consumption-led growth. Jet fuel product supplied is up 10.1 percent compared with the same four-week period a year ago.

"The options market shows increased demand for downside protection".

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