By Kevin Baxter
Oil prices edged higher Tuesday during a typically quiet period of the year before the long holiday season starts in earnest later in the week.
The February contract for global crude benchmark Brent was up 0.62% at $55.26 a barrel while its U.S. counterpart West Texas Intermediate gained 0.30% to $53.22.
With the Organization of the Petroleum Exporting Countries not initiating production cuts until January, the headline-driven trading of the last three months has abated, leading most observers to state that prices will likely stay in the $50-$55 a barrel range until the new year.
Bjarne Scheildrop from the Stockholm-based SEB bank said in a note that higher prices wereinevitable, but that the reaction would be a strong inflow of new U.S. shale oil rigs in the first half of 2017.
Mr. Schieldrop added that global oil inventories would continue to be elevated in the first half of next year. He said that a period of backwardation, a term that describes the situation when the future price of a commodity is cheaper than the current price, would force around 300 million barrels of oil onto the market.
Meanwhile, European oil demand was up by 190,000 barrels a day year-on-year in October with peripheral Europe up by 300,000 barrels a day, which canceled out some declines from within the European Union, according to a note published by the London-based Energy Aspects.
The think tank also said that an uptick of gas production in Saudi Arabia is also driving down Middle East oil demand, which fell by 190,000 to 6.35 million barrels a day year-on-year in October. Saudi Arabia was responsible for almostall of that, falling by a hefty 170,000 barrels a day.
The American Petroleum Institute will release its U.S. crude stock inventory figures for last week later today. This will be followed by the official data from the Energy Information Administration on Wednesday.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--gained 0.19% to $1.57 a gallon, while diesel futures were flat at $1.67 a gallon. ICE gas oil futures changed hands at $488.25 a metric ton, up $1.25 from the previous settlement.
Write to Kevin Baxter at Kevin.Baxter@wsj.com
(END) Dow Jones Newswires
December 20, 2016 05:32 ET (10:32 GMT)
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