Crude oil prices take a breather after hitting 2016 highs
Published 2016-04-28 08:10:40| Amwal Al Ghad English
Crude futures pulled back from 2016 highs on Thursday as traders locked in profits after April's sharp rally, but analysts said falling U.S. production, strong investor appetite and a weakening dollar could push prices higher soon. International Brent crude futures were trading at $46.91 per barrel at 0638 GMT, down 27 cents from their last settlement. U.S. West Texas Intermediate (WTI) futures were down 20 cents at $45.13 a barrel. The dips came after both benchmarks rose on Wednesday to their highest levels for 2016 in what has been one of the steepest price increases in recent years. Both Brent and WTI have rallied more than 70 percent since their respective 2016 lows in January and February. Record crude storage figures may have spurred some investors to take profits on Thursday by closing long positions, traders said, and government data on Wednesday showed that U.S. crude stocks climbed 2 million barrels last week to an all-time peak of 540.6 million barrels. Despite the price falls, analysts said that sentiment had clearly turned bullish, and that further price rises were likely. "We ... appear to be at the beginning of a bull market," U.S. investment bank Jefferies said on Thursday. Analysts said falling output in the United States, where Energy Aspects said there were now even "murmurings of volumes falling short" of demand, and a weak dollar were supporting prices and attracting investors. "The recent trend of rising crude oil prices received another boost after U.S. output was shown to have fallen again last week," ANZ bank said, following a release by the U.S. Energy Information Administration (EIA) showing that crude oil production fell to 8.94 million barrels per day (bpd) last week, down almost half a million bpd from this time last year. While Jefferies said it expected the market to remain oversupplied in the near term, it said that crude inventories should begin to fall by the third quarter, "setting the stage for a fundamental recovery". Analysts said that further bullish momentum could emerge due to ongoing weakness in the dollar, which is down almost 6 percent this year against a basket of other leading currencies, as a weaker greenback makes dollar-traded crude cheaper to buy for countries using other currencies at home. The Federal Reserve said Wednesday that it would leave U.S. interest rates unchanged, while the bank of Japan said Thursday it would hold back from expanding stimulus. Jefferies also warned that global spare capacity, estimated around 2 million bpd, or 2 percent of demand, was "precariously low" given the frequency of unexpected disruptions recently, including pipeline interruptions and strikes, as well as "the dire fiscal situation of producers like Venezuela, Iraq and Nigeria."
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Oil prices dipped on Tuesday as disagreement flared within producer cartel OPEC on who should cut how much production in a planned coordinated reduction to prop up prices. The dollar, which held near nine-month highs against a basket of major currencies, also weighed on prices. A strong dollar makes greenback-denominated commodities including oil more expensive for holders of other currencies. International Brent crude oil futures fell 8 cents to $51.38 per barrel as of 0528 GMT from their last close. U.S. West Texas Intermediate (WTI) crude futures were down 1 cent at $50.51 a barrel.
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