Hedge fund managers are increasingly betting Saudi Arabia and its allies can not or will not replace all the crude lost from the market when USA sanctions on Iran go into effect fully from November. With sanctions due to resume on November 4, the sharp drop-off in supply from the Persian Gulf state has helped buoy crude oil prices.
Five analysts polled by Reuters forecast that us crude and gasoline stockpiles rose last week, while distillate inventories declined.
Brent rose 9 cents to $85.07 per barrel by 11:53 a.m. EDT, a day after reaching a four-year high of $85.45.
But Brent spot prices have climbed by more than $12 per barrel (17 percent) since mid-August while the six-month calendar spread has risen nearly $2.60 and swung from contango into a pronounced backwardation. A touted tool to lower oil prices was for the United States to tap into its emergency oil reserves in order to provide ample supply, however, the energy secretary had ruled this out due to the limited impact that this would have on reducing prices. "At the same time, the U.S. -Mexico-Canada Agreement is also improving the overall sentiment for oil".
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Brent and WTI have roughly tripled compared with lows seen in January 2016, when the Organization of the Petroleum Exporting Countries and allies led by Russian Federation started to curb oil supplies to rebalance an oversupplied market.
But Japanese bank Mitsubishi UFJ Financial Group said in a note to clients that market risks "are heavily skewed to the upside and whilst we are not explicitly forecasting Brent to rise to $100 per barrel, we see material risks of this coming to fruition".
U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 3 cents at $75.33 a barrel, having hit a four-year high of $75.91 earlier in the session.
U.S. President Donald Trump has blamed OPEC for rising prices in a message on Twitter on September 20 and in a high-profile speech to the United Nations on September 25. While trade tensions still remain between the world's two biggest economies, the deal caps a turbulent period for relations between the US and Canada, traditionally close allies on national security and trade. The oil market will also be waiting for any signals from Khalid Al-Falih, the Saudi energy minister, who's due to speak in events in Morocco and Russian Federation on Monday and Thursday respectively. In the first quarter of 2019, Natixis expects Brent to average $79 per barrel from an estimated average price of $81 for the December quarter, but after that, in every quarter in 2019, the average three-monthly price will go up with Q4-19 price projected to go up to $86. To contact the reporter on this story: Heesu Lee in Seoul at firstname.lastname@example.org. All comments are subject to editorial review.