Crude Oil Steady at 18-Month High in London on Cutback Optimism
London, July 6 (Bloomberg) -- Crude oil was little changed
in London and reached $20 a barrel in New York for the first time
in more than 18 months on signs that OPEC is adhering to
production targets designed to end a glut of oil.
Yesterday, oil futures in London surged 2.9 percent, pushed
higher by a Bloomberg survey last week that said the Organization
of Petroleum Exporting Countries, which supplies a third of the
world's daily oil needs, made 94 percent of its promised cutbacks
in June, up from 91 percent in May.
''It's a rip-roaringly positive market that shows no signs
of exhaustion -- OPEC is doing enough to keep prices where they
are,'' said Lawrence Eagles, a broker with GNI Ltd.
Brent crude oil for August delivery declined 6 cents to
$18.12 a barrel on the International Petroleum Exchange in
London. August crude oil on the New York Mercantile Exchange,
which was closed yesterday because of the Independence Day
holiday, climbed as much as 31 cents, or 1.6 percent, from
Friday's close to $20 a barrel in electronic trading.
OPEC is working with four other oil-exporting nations to trim
world supplies by more than 5 million barrels a day, or about 7
percent, to reduce a glut that sent prices to a 12-year low in
December.
As a result of the recent cuts, Brent crude prices have
surged 70 percent this year. Prices gained in the first four
months, only to stall in April and May as declining profits
forced refiners to cut back purchases. The rally resumed in the
past month as reportable supplies in the U.S. began to decline.
Inventories
Reports last week by the American Petroleum Institute and
the U.S. Department of Energy showed U.S. crude oil inventories
were shrinking. The API said supplies as of June 25 were 329.9
million barrels, 10.4 million barrels less than a year earlier.
''The stockpile reports last week underlined the cuts and
boosted prices,'' said Tony Machacek, a broker with Prudential
Bache Futures. ''I expect them to provide more direction for
prices again'' this week.
Both reports are delayed by a day this week. The API figures
are to be released Wednesday night and the DOE's report at 2 p.m.
London time on July 8th. They often move world energy prices
because the U.S. is the world's largest energy consumer.
Still, oil prices could fall after a rally of yesterday's
magnitude because some traders will bet the market has risen too
quickly based on historical price movements, or technical
analysis, traders said.
On indicator of this is the three-day relative strength
index, or RSI, for August Brent futures, a measure of advances
and declines in prices that closed yesterday at 97.
A number above 75 indicates prices could fall, while a
number below 25 suggests prices could increase, traders said.
''The only time I ever saw the market hold onto high RSI's
was during the Gulf War,'' said Tom James, chief executive
officer of Swapnet Ltd. in Singapore. ''The chances are the
market might move lower in the next two days because it is
seriously overbought.''
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