Showing a positive indication in the crude oil market, the two major indicators Brent and WTI rose to some extent in Friday’s trading. There was an upward movement in Brent which reversed course from a two-month low and closed at a higher point. Similar, the trend was seen in the U.S. crude which ended higher. The major reason behind the positive trade according to observers is that demand for heating fuels has gone up. Also, there is a slight rise in gasoline prices.
Nonetheless, observers with a keen eye on the oil markets, the gains were offset by expectations for increased supply from Libya and Iran. The two countries will soon start supplying oil which is expected to harm the global prices of oil. It may definitely have an impact on the Brent which depends a lot on the supply from the middle-east oil.
Market observers believe that Brent prices have fallen almost 10 percent since August on expectations of a supply boost from Libya and Iran. This in effect has narrowed the European benchmark’s premium over U.S. crude to a low of $11.16, which in fact, is the tightest since Dec. 20. Though it may sound unnecessary alarmist opinion, it is pertinent that Iran which was cut from the oil supply market is coming big way to cover the losses it incurred due to the embargo.
Heavy Snowfall and Increased Demand for Gasoline in the USA
On the other hand, U.S. gasoline and heating oil futures climbed more than one percent. The major reason behind the hike was that demand in the country increased sharply on forecasts of more cold weather conditions and heavy snowfall. Nevertheless, government data released earlier in the week showed an unexpectedly large drawdown in oil stocks and in distillates.
Earlier, huge stockpiles of crude marred the WTI crude; however, as this is now going down, the prices are going to go up. Whereas Brent crude reversed earlier losses to trade near $107 a barrel, U.S. crude rose 41 cents to settle at $94.37 a barrel. The rise in U.S. crude was the first weekly gain in three weeks and according to some market observers it is sending the right signals to investors.
Other predictions out there in the market show that TransCanada’s Gulf Coast pipeline which is expected to begin pumping 300,000 barrels per day of U.S. crude oil from the U.S. storage hub in Cushing, Oklahoma, to the Gulf Coast next week, in all probabilities will the US crude prices as it will further narrow its discount to Brent.
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