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Oil dips away from levels last seen in late 2014, but analysts say market supported

by January 12, 2018 General

By Henning Gloystein

(Reuters) – prices eased on Friday after hitting their highest levels since December, 2014 the previous day.

Despite the dip, analysts said market fundamentals going into 2018 were strong due to ongoing production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and that coincide with healthy demand growth.

U. S. Intermediate (WTI) crude futures were at $63.58 a barrel at 0112 GMT – 22 cents, or 0.3 percent, below their last settlement. WTI the day before hit its strongest since late 2014 at $64.77 a barrel.

Brent crude futures were at $69.18 a barrel, 8 cents, or 0.1 percent, below their last close.

Brent also marked a December-2014 high the previous day, at $70.05 a barrel.

“OPEC has acted successfully to reduce the inventory overhang and demand growth remains robust in the short term,” said Sanjeev Bahl, at in a 2018 outlook.

The production cuts started in January last year and are set to last through 2018.

“There is potential for prices to move higher as inventories normalise,” Bahl said.

U. S. commercial crude inventories fell almost 5 million barrels in the week to Jan. 5, to 419.5 million barrels.

That’s slightly below the five-year average of just over 420 million barrels.

(To view a graphic on U. S. production, inventories, click

Fuel price hedging company Risk Management said in its 2018 outlook that “the likelihood of elevated prices this year seems imminent”, largely due to the ongoing supply cuts led by OPEC and as well as political risk especially in Iran, and

Risk Management said this was despite U. S. production , currently at 9.5 million barrels per day (bpd), likely breaking through 10 million bpd.

Another factor that may hamper crude prices would be a drop-off in orders from refineries.

In Asia, average refinery profit margins have fallen below $6 per barrel this month, their lowest seasonal level in five years.

As a result, some refiners have already scaled back their output, reducing demand for feedstock crude.

Taking into account price supportive and pressuring factors, a market survey of over 1,000 conducted by in January showed crude price expectations clustered in a range of $60-$70 per barrel for 2018.

(To view the 2018 market survey results, click

(Reporting by Henning Gloystein; Editing by Joseph Radford)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)