Oil Prices Could Rise to $100

Oil futures jumped almost 3 percent on Wednesday on a decline in US crude inventories and after sources signaled top exporter Saudi Arabia wants to see the crude price closer to $100 a barrel.

Extending OPEC's current deal with Russian Federation and other top non-OPEC members to cut production by 1.8 million barrels of oil per day would help raise prices.

U.S. West Texas Intermediate (WTI) crude futures CLc1 rose 61 cents to $69.08.

The kingdom, the de facto leader of OPEC, would be happy with Brent oil at $80-$100 per barrel to help boost the valuation of its state-run oil company, Saudi Aramco, before a minority stake goes public, sources told Reuters Wednesday.

At the gathering in the Saudi city of Jeddah, OPEC and Russian Federation will discuss prolonging their cooperation, including new inventory targets that extend their output cuts beyond this year.

Yields on USA two-year Treasuries stood at levels last visited in 2008 at 2.43 per cent and 10-year German yields went above 0.55 per cent for the first time in nearly a month.

The oil market has been supported by concerns about geopolitical tension and supply disruptions in crude-producing nations.

Global resource stocks were the winners from Thursday's higher in prices. After the deal, Saudi Arabia could return to the strategy they used in 2014, refusing to balance supply and pushing prices to multi-year lows by increasing output.

"The fact that the gasoline inventory reduction was more pronounced than anticipated was due to record-high gasoline demand, which is extremely unusual outside the summer driving season", said Commerzbank analysts in a note.

Investors have taken a buying position in the market in the hope that the agreement will be extended and a global supply glut will be further reduced, analysts said.

The impression is that oil prices are seen as not yet high enough to encourage sufficient oil investment. While futures in London have broken past the 50 percent Fibonacci retracement of the slump from when they were above $100 in mid-2014, another signal shows the rally could persist to the line just under $82.

While analysts forecast Brent to rally up to $80 per barrel in the run up to the U.S. strikes against Syrian targets, such a high is likely to remain for a "short period but not be sustained", cautioned Spencer Welch, oil markets director at IHS Markit. The shale oil sector's resilience is thanks to technological advances and lower production costs that not only has set OPEC on its heels but could soon dethrone Russian Federation as the world's largest oil producer.

  • David Armstrong