Saxo Bank on upside potential for oil prices
Baku, Azerbaijan, Aug. 29
By Aygun Badalova - Trend:
Overhang of supply as well as the rise in the US oil production will keep the the upside potential for oil prices limited, Ole Hansen, Head of Commodity Strategy at Saxo Bank believes.
“Oil calmed down following a couple of dramatic weeks where the cost of a barrel of oil had fallen by more than 20 percent on short selling before rising even faster by 24 percent on an even more aggressive round of short-covering,” Hansen told Trend August 29.
Daily trade inspiration has been provided by the current tug of war between challenging near-term fundamentals and OPEC members pondering how to support the market, he said.
Hansen also noted that Brent crude oil's return to $50 per barrel has triggered a pickup in hedging activity from oil producers, especially US shale oil producers.
“This, combined with the continuous rise in the number of oil rigs in the US during the past three months, as well as the continued overhang of supply, will likely continue to cap the upside potential to the low 50s over the coming months,” Hansen said.
Oil prices fell over one percent on Monday after the US dollar jumped, with markets pressured as Iraq's production rose and as Iran said it would only cooperate in talks to freeze output if fellow exporters recognized its right to fully regain market share, Reuters reported.
Brent crude futures LCOc1 were trading at $49.22 per barrel, down 70 cents, or 1.4 percent, from their previous close.
US WTI crude was down 75 cents, or 1.6 percent, at $46.89 a barrel.