Major banks including UBS and BAM are bearish on the near-term while being optimistic in the long run.
Diminished U.S. stocks and with wildfires looming threats on Canadian oil supplies, U.S. crude oil prices hit their 7 months high yesterday. The initial momentum was however to some extent lost due to higher oil productions from Libya.
As per analysts, last week crude oil inventories in the U.S went down for a straight second week and have declined by 3.2 million barrels.
Meanwhile the Canadian oil scenario got fresh doze of bad news, as massive wildfires once again disturbed the oil sands hub of Fort McMurray, Alberta. Because of them, nearly 4,000 people had to evacuated from work camps.
In Libya, with rival oil factions signing a deal, the restoration of crude oil production has taken its first steps in the North African country.
Brent crude’s rose by 42 cents to $49.39, and came to its six months high of $49.47.
“All in all, this feels like a complex that still possess enough bullish momentum to boost nearby WTI values to above the $50 mark, while bolstering July Brent to as high as the $53-54 area,” said Jim Ritterbusch from Ritterbusch & Associates, a Chicago-based oil markets consultant.
However, prominent banks including UBS and Bank of America Merrill Lynch (BAM) were of the opinion that the rally could fade.
“As refiners prepare to go into maintenance, we thus reiterate our end of 3Q16 target for WTI of $39 per barrel,” said BAM in a note. It suggested investors sell WTI “into event-driven stress at $45.75.”
As for UBS, it raised its longer-term Brent target to $55, up from $47, but remained bearish near-term.
“Although a smaller market surplus reduces the risk of prices hitting $30 a barrel in the short run, temporary price setbacks towards $36 mark our base case,” said UBS in a note.
Traders will be hawk eyed for more U.S. crude inventory data which is scheduled to be released from the American Petroleum Institute, after market settlement at 4:30 p.m. EDT (2030 GMT).
The U.S. government will issue official stockpiles data on Wednesday.
Categories: Economy & Finance, Geopolitics, Strategy
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