Oil prices dip as rally runs out of steam with investors booking profits
*Analyst see prices averaging $54 in H2…
Oil prices were lower on Tuesday as market players took profit after eight straight days of gains, its longest winning streak since February 2012.
Crude prices received support from data last week that U.S. production may be moderating, but concerns over the global supply glut remain in the spotlight. Trade was also expected to be light due to the holiday stateside.
U.S. crude oil futures fell 0.25% to $46.95 at 6:04AM ET (10:04GMT), while Brent oil lost 0.32% to $49.52 as at 12 noon GMT Tuesday.
The falls came after both benchmarks recovered around 12 percent from their recent lows on June 21.
Many traders indeed closed positions ahead of the U.S. Independence Day holiday on July 4, while Brent also faced technical resistance as it approached $50 per barrel, traders said. Despite this, the market’s outlook has shifted somewhat.
Late May and most of June were overwhelmingly bearish as U.S. output rose and doubts grew over the ability of the Organization of the Petroleum Exporting Countries (OPEC) to hold back enough production to tighten the market.
But sentiment began to shift toward the end of June, when U.S. data showed a dip in American oil output and a slight fall in drilling for new production.
Read also: Libya oil output at 4-year high loosens OPEC grip on supply
“The fact that prices have not come under any noticeable pressure of late points to a shift in sentiment,” Commerzbank is reported to have said on Tuesday.
“This may be related to the fact that most of the ‘shaky hands’ have withdrawn from the market by now,” the bank added.
Prices rose in recent days despite OPEC production hitting a 2017 high of 32.72 million barrels a day in June, according to a Reuters survey.
The group’s efforts to rebalance the market have been undermined by rising production from Libya and Nigeria, who are exempt from the cuts.
Libya is currently pumping around one million bpd of crude, a four-year high.
OPEC exports also rose for a second month in a row in June to 25.92 million bpd, a rise of 1.9 million bpd compared with the same month last year, according to a report by Thomson Reuters Oil Research.
“We see a recovery for oil prices in H2 2017 from current levels, with OPEC production cuts, a slowdown in global supply growth and seasonally firming demand driving up prices,” BMI Research said, although it added that “large-volume supply additions will keep price growth flat year on year in 2018”.
BMI said it expected Brent to average $54 per barrel in the second half of this year, and to average $55 a barrel in 2018. It equally expects WTI to average $51 in the second half of 2017 and $52 next year.