Oil’s rise to $70 a barrel for the first time in three years had clear triggers as supplies tighten and demand climbs, yet it still surprised many traders because there were so many reasons for prices to falter, said experts.
Those bearish pressures are still in place, and could make it tough for crude to hold onto its gains, they stated.
One thing the major forecasters agree on is that, after shrinking dramatically in 2017, oil stockpiles should be starting to build up again.
Global oil demand dips seasonally as the need for winter fuels recedes, and data from both Opec and the International Energy Agency suggest that will tip the market back into surplus in the first half of this year. Inventories will shrink again in the second half, their data indicate.
While weekly US data shows that crude inventories are declining, it’ll be another couple of months before a clear picture for other consumers emerges.
Supply disruptions boosted prices in early December, when a critical North Sea pipeline was halted, and at the end of the month when a pipeline explosion curbed flows from Opec member Libya.
The suspension of the Forties Pipeline System - one of the North Sea’s biggest disruptions since the 1980s - was resolved by the end of last month, and repairs on the conduit to Libya’s Es Sider terminal were completed about the same time. Yet the resolution of both outages did little to push prices lower.
Risks to production still remain, though, with Goldman Sachs Group Inc. considering Venezuela and Nigeria to be among the most vulnerable.