Oil Prices Fall After 13 Percent Gain in the Past Month

On Wednesday, the prices of oil gave away its earlier gains as analysts warned of a descending correction after prices have increased more than 13 percent over the past month.

Prices of oil went down after 13 percent gain last month.

In spite of the decline, the larger portion of oil markets stayed well supported on the back of tightening supply and sturdy global demand. The tighter fundamentals lifted both crude futures benchmarks about 13 percent above levels in early December, helped by production curbs by OPEC and Russia, as well as by healthy demand growth.

Meanwhile, Brent crude futures were at $69.07 a barrel, a decrease from a high of $69.37 earlier in the day and 18 cents down their last close.

Brent increased to $70.37 a barrel on Monday, its highest since December 2014, which was the start of a three-year oil price slump.

The crude futures of the U.S. West Texas Intermediate (WTI) were at $63.68 a barrel, 5 cents below their last settlement.

“Price correction should occur... As hedge fund expectations for further rising prices have reached excessive levels,” stated Norbert Ruecker, the head of commodity research at Swiss bank Julius Baer.

He stated that this was especially the case as political risk factors that have helped lift Brent. This includes the tensions in Qatar, and the Kurdish region of Iraq, and in Iran have so far not caused any significant supply disruptions.

According to the U.S. Commodity Futures Trading Commission and the International Exchange, money managers have elevated the bullish position in Brent and WTI crude futures.

A commodity analyst, Wang Tao stated that Brent might drop to around $68.50 a barrel due to technical chart indicators.

Nevertheless, some traders and analysts said that the overall oil markets are well-supported and steep price decreases are unlikely.

Russia and the Organization of the Petroleum Exporting Countries (OPEC) have continued to withhold production since January last year and the cuts are set to last through this year.

“Oil remains underpinned by the solid economy with strong oil demand tightening global oil inventories. The past years' surplus supplies are slowly disappearing,” stated Ruecker.

Last year, one factor that prevented crude prices from increasing further was a surge in U.S. production.

Despite its latest fall due to the extreme cold weather, the crude output of U.S. is expected to break through 10 million barrels per day soon, which challenge the top producers Saudi Arabia and Russia.

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