U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $54.05 a barrel, 10 cents below their last close. But that was still near their highest level since February and up around 28 percent since 2017-lows marked in June.
Despite generally upbeat market sentiment, some analysts were cautious after several days dominated by strong price rises. “U.S. shale output could keep a lid on prices over the medium to long-term,” said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers.
WTI’s $6.7 per barrel discount to Brent CL-LCO1=R is a result of rising American crude production C-OUT-T-EIA, which is up almost 13 percent since mid-2016 to 9.5 million barrels per day (bpd), making U.S. crude exports highly profitable.
There are also technical chart indicators that warrant caution, analysts said.
“The relative strength indexes (RSI) on both contracts are at overbought levels. These could leave oil vulnerable to short-term corrections lower,” said Jeffrey Halley, senior market analyst at future brokerage OANDA.
An RSI is a trading momentum indicator in which a value of over 70 points is seen to be overbought. Brent’s current RSI is at 70.12 points.
The bullish market has been fuelled by an effort led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to hold back about 1.8 million barrels per day (bpd) in oil production to tighten markets and prop up prices.
The pact runs to March 2018, but Saudi Arabia and Russia have voiced support to extend the agreement.
OPEC is scheduled to meet officially at its headquarters in Vienna, Austria, on Nov. 30.
“The fear of oversupply could easily turn to a fear of undersupply if inventories keep declining like they have been and demand continues to grow,” said William O‘Loughlin, investment analyst at Rivkin Securities.
Reporting by Henning Gloystein; Editing by Editing by Joseph Radford