​WTI near $57 as `glut, glut glut' gives way to tightness

Traders played follow-the-bouncing-ball with oil prices close to a 2 1/2-year high after OPEC boosted its demand projections for next year.

Futures in New York fluctuated around the $57-a-barrel mark on Monday before settling little changed and just 59 cents below the Nov. 6 close that was the highest since June 2015. OPEC raised its estimates for the amount it will need to pump to meet demand next year by 400,000 barrels a day to 33.4 million a day, according to a monthly report from the group.

“With OPEC raising estimates, there’s an expectation that the market’s a lot tighter,” said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago, in a telephone interview. “We’ve gone from mentality of glut, glut, glut, to more rebalancing.”

Oil has climbed 20 percent since the start of September as global supplies tightened and speculation mounted that the Organization of Petroleum Exporting Countries and allies producers will extend output curbs beyond the end of March. In Abu Dhabi on Monday, OPEC Secretary-General Mohammad Barkindo described the production curbs as the “only viable option” to erode excess supplies.

Prices have also been boosted by internal upheaval in Saudi Arabia, OPEC’s biggest member, and escalating tensions with rival oil giant Iran. A pipeline between Saudi Arabia and Bahrain halted briefly over the weekend following an attack.

“Without this fervor being continually fanned, prices are vulnerable to falling back,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, by telephone.

At the same time, crude stockpiles at the key pipeline hub in Cushing, Oklahoma, fell 1.9 million barrels to 64.6 million in the week ended Nov. 10, Genscape said, according to people familiar with the report. The dip came after the Energy Information Administration reported supplies in the previous week were at the highest seasonal level going back to 2004.

West Texas Intermediate for December delivery traded 2 cents higher to settle at $56.76 a barrel on the New York Mercantile Exchange. Prices capped a fifth weekly gain last week, the longest run since October 2016.

Brent for January settlement fell 36 cents to close at $63.16 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $6.19 to January WTI.

Saudi Arabia said it will boost security at its oil facilities after Bahrain blamed Iran for a fire at a pipeline that connects the two Arab allies. Iran denied involvement. The pipeline resumed pumping later in the day.

The pipeline attack “is a dangerous Iranian escalation that aims to scare citizens and hurt the global oil industry,” Bahrain’s Foreign Minister Khalid Al-Khalifa said on Twitter. Iran responded by saying the Bahrainis “need to know that the era for lies and childish finger-pointing is over,” the Islamic Republic News Agency reported Sunday, citing a foreign ministry spokesman.

©2017 Bloomberg L.P.