Oil rises on weaker
dollar, market balance signals
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[October 18, 2016]
By Sabina Zawadzki
LONDON
(Reuters) - Oil prices rose on Tuesday, helped by a weaker dollar and
the notion that global markets oversupply may be moderating, ahead of a
November meeting of OPEC producers that could decide to cut production.
A proposal by the Organization of the Petroleum Exporting Countries to
cut or cap output helped lift crude prices above $50, but not much more
because market participants doubt the cartel's ability to strike and
implement a concrete deal.
But several analysts have now said a two-year global supply glut could
be receding if the latest oil inventories are taken into account. They
say that stocks are not as high as usual ahead of the winter fuels
season.
Brent crude rose 38 cents, or 0.8 percent, to $51.90 a barrel by 1100
GMT. U.S. West Texas Intermediate (WTI) crude was up 45 cents, at
$50.39.
Traders said a drop in the dollar away from seven-month highs the
previous day <.DXY> supported crude. A lower dollar makes fuel purchases
cheaper for countries using other currencies domestically.
Analysts at Bernstein Energy also pointed to a slower build in global
oil inventories.
"Global oil inventories (industry and government) increased by 17
million barrels to 5.618 billion barrels in 3Q16. This is the smallest
build since 4Q14, confirming that inventory builds are slowing as the
market comes back into balance," it said.
Citi Bank pointed to an overall drop in inventories in the United
States, Japan, Singapore and Europe of 35.9 million barrels. Analysts at
Wood Mackenzie have forecast a balanced market by the end of the year.
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BULLISH BETS
Traders are taking note, with money managers raising their bullish bets on U.S.
crude prices to the highest level since the slump started in 2014.
JBC Energy said October tanker fixtures from the Gulf reached a five-year high,
which could be due to physical traders buying additional storage before November
to offset further price rises should OPEC take effective action.
OPEC
meets on Nov. 30 to discuss a cut of about 1 million barrels per day (bpd) from
its record 33.6 million bpd September output.
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Contributing to the record output has been Iran's rising export levels after
Western sanctions were lifted earlier this year. Iran's October crude exports
are set to hold near five-year highs at about 2.56 million bpd, a source with
knowledge of its preliminary tanker schedule said.
While there has been focus on the supply side of the global market, concerns
remain about demand, particularly in Asia, a pillar of demand growth in recent
years.
In China, the trade environment will remain weak for the remainder of 2016, the
commerce ministry said on Tuesday and in India, fuel demand fell in September.
(Additional reporting by Henning Gloystein in Singapore; Editing by David
Goodman and William Hardy)
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