SINGAPORE: Oil prices gave away earlier gains on Wednesday as analysts warned of a downward correction after prices have gained more than 13 percent over the past month.
Despite the decline, overall oil markets remained well supported on the back of tightening supply and strong global demand.
The tighter fundamentals lifted both crude futures benchmarks about 13 percent above levels in early December, helped by production curbs by OPEC and Russia, as well as by healthy demand growth.
Brent crude futures were at $69.07 a barrel at 0441 GMT, down from a high of $69.37 earlier in the day and 18 cents below their last close.
Brent on Monday rose to $70.37 a barrel, its highest since December 2014, which was the beginning of a three-year oil price slump.
US West Texas Intermediate (WTI) crude futures were at $63.68 a barrel, down 5 cents from their last settlement. WTI rose to $64.89 on Tuesday, also the highest since December 2014.
Norbert Ruecker, head of commodity research at Swiss bank Julius Baer, said a price “correction should occur... (as) hedge fund expectations for further rising prices have reached excessive levels.”
He said this was especially the case as political risk factors that have helped boost Brent, including tensions in Qatar, and the Kurdish region of Iraq and in Iran have so far not caused significant supply disruptions.
Money managers have raised the bullish positions in WTI and Brent crude futures and options to a record, according to data from the US Commodity Futures Trading Commission and the Intercontinental Exchange.
Wang Tao, Thomson Reuters commodity analyst, said Brent may fall to around $68.50 a barrel due to technical chart indicators.
Still, traders and analysts said overall oil markets were well supported, and steep price falls unlikely.
The Organization of the Petroleum Exporting Countries (OPEC) and Russia have continued to withhold production since January last year and the cuts are set to last through 2018.
This restraint has coincided with healthy oil demand.
“Oil remains underpinned by the solid economy with strong oil demand tightening global oil inventories. The past years’ surplus supplies are slowly disappearing,” Ruecker said.
One factor that in 2017 prevented crude prices from rising further was a surge in US production.
Despite a recent drop due to extreme cold, US crude output is expected to soon break through 10 million barrels per day, challenging top producers Russia and Saudi Arabia.
Oil loses earlier gains as analysts warn of correction
Oil loses earlier gains as analysts warn of correction
Related
Saudi Arabia opens 3rd round of Exploration Empowerment Program
RIYADH: Saudi Arabia’s Ministry of Industry and Mineral Resources, in collaboration with the Ministry of Investment, has opened applications for the third round of the Exploration Empowerment Program, part of ongoing efforts to accelerate mineral exploration in the Kingdom, reduce early-stage investment risks, and attract high-quality investment from local and international mining companies.
The third round of the program offers a comprehensive support package targeting exploration companies and mineral prospecting license holders. The initiative aims to lower investment risks for their exploration projects and support a faster transition from exploration to development.
Incentives under the program include cash support of up to 25 percent of eligible exploration expenses, covering drilling, laboratory testing, and geological studies, alongside wage support of up to 15 percent for technical staff and experts based in Saudi Arabia.
"The program provides coverage of up to 70 percent of the total salaries of Saudi technical staff, such as geologists, during the first two years, increasing to 100 percent thereafter, in line with program requirements.
This support aims to develop talent, build national capabilities in mineral exploration, promote job localization, and facilitate the transfer of geological knowledge.
The application for the third round opened on Jan. 14, allowing participants to benefit from the Kingdom’s attractive investment environment, its stable legal framework, and streamlined regulatory structures, as well as integrated infrastructure that supports the transition from mineral resources to operational mines.
The ministry has set the timeline for the third round, with the application period running from Jan. 14 to March 31.
This will be followed by the evaluation, approval, and signing of agreements from April 1 to May 31, with the eligible projects set to be announced between June 1 and July 31 of the same year.
The program stages include submitting exploration data during the reimbursement and payment phase from Sept. 1 to Nov. 30, followed by technical and financial verification of work programs and approval of the disbursement of support funds in January 2027. The exploration data will then be published on the National Geological Database in April 2027.
The ministry emphasized that the EEP focuses on supporting the exploration of strategically important minerals with national priority. It also contributes to enhancing geological knowledge by providing up-to-date data that meets international standards, helping investors make informed decisions and supporting the growth of national companies and local supply chains.
The ministry urged companies to apply early to benefit from the program’s third round, which coincided with the fifth edition of the International Mining Conference, which was held from Jan. 13 to 15.
