Bears may have an upper hand in Brent crude market for time being amid mixed signals from fundamental factors.
Faltering compliance from the Opec countries amid rising output from Libya and Nigeria, along with a pickup in demand may keep oil prices volatile in coming weeks.
“.Oil bears are likely to remain in control, which is until the spell of lower highs, as seen since February, is broken,” said Ole Hansen, head of commodity strategy with Saxo Bank.
Brent prices gained 4.6 per cent last week and closed the Friday’s trade at $48.91 per barrel.
Prices have lingered below $50 a barrel amid concerns that elevated global supplies will offset cuts by the Organisation of Petroleum Exporting Countries and its partners as part of a deal to help rebalance the market.
Emirates NBD lowered its 2017 forecasts for Brent to an average of $51.50 per barrel from $54 per barrel previously.
“For next year, we expect prices will stay roughly at those levels with a risk they drift lower if Opec production surprises to the upside,” Edward Bell, commodity analyst with Emirates NBD said in a recent note.
The International Energy Agency said the Opec’s compliance slumped to 78 per cent in June, the lowest rate this year, from 82 per cent in May, even as the non-Opec showed an improvement.
On the demand side, the second quarter witnessed acceleration in demand to 1.5 millions of barrels per day compared to the first quarter.
Falling Opec supplies and rising demand would mean that Opec and non Opec producers will have to continue to extend output cuts beyond March 2017.
“The persistently large overhang of global supply combined with the slow reduction currently seen has sharpened the focus on the need for a lower price for longer. This is required to affect high-cost US shale oil producers’ ability or willingness to keep adding rigs and boosting production,” Hansen said.
Bank earnings to decide direction in UAE equities
Results from banks like Emirates NBD, Dubai Islamic Bank and other banks in Abu Dhabi banks are expected to give to direction to equity markets this week.
Analysts expect lower provisioning in the second quarter because of tighter lending requirements in the last three quarters even as they expect a flat operating profit due to cautious approach to lending.
The Dubai Financial Market General index has been on a gaining streak on the back of turnaround in sentiment triggered by renewed buying in Emaar Properties on hopes of dividend from a unit post the initial public offering.
The index has gained 5 per cent in the past seven sessions.