Oil Prices Soar To 2015 High

Crude oil prices surged on Wednesday afternoon but gave back a bit of those gains in the Asian session on Thursday as traders booked profits. WTI dipped 35 cents to 56.04 while Brent oil dipped just 12 cents trading at 62.73. Brent crude oil prices opened at their highest level since February and close to 2015 highs in early Asian trading on Thursday after a near 6 percent rally the previous session, but analysts warned that the market remains oversupplied. Oil prices jumped steeply on Wednesday after U.S. inventories built up more slowly than expected and talks between major oil producers this week triggered speculation of production cuts, although most analysts said these were currently unlikely.

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report yesterday. U.S. commercial crude inventories increased by 1.3 million barrels last week, maintaining a total U.S. commercial crude inventory of 483.7 million barrels, the 13th consecutive week of a higher total than at any time in at least 80 years. Crude oil had risen sharply from a low of around $50 a barrel last Friday to more than $54 a barrel on Wednesday. U.S. domestic production is beginning to feel the impact of all those idled drilling rigs. The International Energy Agency (IEA) raised its forecast for demand growth by 90,000 barrels a day to 1.1 million barrels a day. Gasoline inventories decreased by 2.1 million barrels last week, and remain well above the upper limit of the five-year average range. Total motor gasoline supplied (the EIA’s measure of consumption) averaged 8.9 million barrels a day for the past four weeks, up by 0.7% compared with the same period a year ago.

The deceleration in U.S. oil output is greater than the market is currently pricing in, a Standard Chartered analyst said. “We believe that U.S. shale oil output is already falling, and that current rig counts imply that the month-on-month decline will exceed 70,000 barrels a day by June,” Paul Horsnell, head of commodities research at Standard Chartered, said in a report.

However, the expected fall in U.S. production won’t be enough to balance the oversupplied global market, analysts at Commerzbank said.

The Organization of the Petroleum Exporting Countries reiterated in its monthly bulletin on Monday that it isn’t willing to cut production unless producers outside the oil cartel also cut. OPEC decided in November to keep its output target at 30 million barrels a day despite the global oil glut.

The latest OPEC Bulletin lays out “in very clear terms the position of the organization as far as controlling production is concerned,” David Hufton of PVM brokerage said in a note. While there have been calls in recent months from various OPEC members to cut production, “the market clearly currently sees no chance of that happening,” Mr. Hufton said.

In an unexpected announcement this week Iran joined into the OPEC price war as Iranian Oil Minister Bijan Namdar Zangeneh said in a statement that the Organization of Petroleum Exporting Countries should cut its crude oil production by around 5% before the organization meets in June. Mr. Zangeneh said that there was a need to support the falling crude oil prices.