MCX Crude oil Free Tips for the day of 25 Jan 2018: Prices buoyed by U.S. dollar at 3-year lows
* Market generally supported by OPEC/Russia supply restraint
* FGE’s Fesheraki says oil could rise to 4980 by May
* But rising U.S. output casts shadow over OPEC-led output cuts
* U.S. crude production edges towards 10 million bpd (Adds comment, updates prices)
By Henning Gloystein
MCX crude oil trading at 4210 per barrel up 74 points in morning trading session. Also the highest level since early December 2014.
Both crude benchmarks have risen by almost 60 percent since the middle of last year.
Price have been supported by supply restrictions led by the Organization. Of the Petroleum Exporting Countries (OPEC) and Russia. The world’s biggest oil producer, which started last year and are set to last throughout 2018.
“That (the producer cuts), the U.S.-dollar fall, along with another inventory draw. Combined to drive (crude) up,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
U.S. crude inventories C-STK-T-EIA fell 1.1 million barrels in the week to Jan. 19, to 411.58 million barrels, the Energy Information Administration (EIA) said on Wednesday. is the lowest seasonal level since 2015 and below the five-year average of about 420 million barrels.
In foreign exchange markets, the U.S. dollar hit its lowest level since December 2014. Against a basket of other leading currencies. weakening dollar often results in financial traders taking investments out of currency markets and into commodity futures like crude.
OIL FUELS INFLATION
Fereidun Fesheraki, chairman of consultancy FACTS Global Energy, told Reuters in Tokyo on Thursday that oil prices could rise further still.
“The market is so tight… The problem with this environment is that if you have something in say, Libya, and production goes down by 500,000 barrels (per day)… it (Brent) can easily go to 4980 by May,” he said.
Analysts said that rising oil prices would likely start to have an inflationary effect.
“Higher oil prices will eventually be reflected in higher consumer prices as the costs of transport of most goods will rise,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
Looming over the generally bullish oil market has been U.S. oil production, which is edging ever more closely towards 10 million barrels per day (bpd), rising to 9.88 million bpd last week.
U.S. output has grown by more than 17 percent since mid-2016, and is now on par with that of top exporter Saudi Arabia.
Only Russia produces more, averaging 10.98 million bpd in 2017. GRAPHIC: U.S. oil production, inventories.
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