Analysts expect limited gains in Brent crude after it rose to its highest level in six months last week.
“Price has been making an unbroken series of higher highs and higher lows amidst a weaker fundamental environment of higher supply. Strong resistance is expected around $48-$49 [per barrel] levels for WTI and $50-$51 [per barrel] for Brent,” Gnanasekar Thiagarajan, director with Commtrendz Research told Gulf News.
On Friday, Brent crude futures settled down 25 cents at $47.83 a barrel while US crude ended 49 cents lower at $46.21. Brent ended the week more than 5 per cent higher.
Global supply disruptions and robust demand have helped support the strong surge seen since the early 2016 lows. The latest supply disruptions from Venezuela and Canada to Nigeria have removed a sizable chunk of the current daily oversupply.
“These developments, combined with the first seasonal inventory draw in the US and a bullish assessment on global demand from the IEA [the International Energy Agency], all helped support prices which increasingly had been showing signs of fading positive momentum,” Ole Hansen, head of commodities strategy at Saxo Bank said.
“While we may see a pop towards $50 per barrel during the current quarter, the risk increasingly remains skewed to the downside,” Hansen said.
However, over a medium term, oil prices may continue to recover.
“Rig counts going down sharply in the US and many shale oil producers going bankrupt owing to a plunge in crude oil prices earlier, the recent Canadian fires and non-Opec output falling faster than expected is helping to support crude prices amid expectations of further dramatic cuts to investment in the industry.
“So fundamentally are fairly balanced and looking good for the medium-term,” Thiagarajan said.
Production outside Opec will drop the most since 1992 as the US shale oil boom falters, the IEA said in April.