KUALA LUMPUR: The oil-price rally that began in mid-February will almost certainly collapse, similar to the false March-June rally last year.
In both cases, prices increased largely because of sentiment, according to Oilpro in its latest report.
As in the earlier rally, current storage volumes are too large and demand is too weak to sustain higher prices for long.
West Texas Intermediate (WTI) prices have increased 47% over the past 20 days from $26.21 in mid-February to $38.50 last week, the portal said.
Oilpro according to the site is a professional network for petroleum engineers, project managers, analysts, geologists, drillers, executives, and everyone else that works in the oil and gas industry.
WTI is a grade of crude oil used as a benchmark in oil pricing. This grade is described as light because of its relatively low density and sweet because of of its low sulfer content.
“A year ago, WTI rose 41% in 35 days from $43 to almost $61 per barrel. Like today, analysts then believed that a bottom had been reached,” it said.
It said, prices stayed around $60 for 37 days before falling to a new bottom of $38 per barrel in late August.
“ Much lower bottoms would be found after that all the way down to almost $26 per barrel at the beginning of the present rally,” it added.
Higher prices were unsustainable a year ago partly because crude oil inventories were more than 100 mmb (million barrels) above the 5-year average.
Current inventory levels are 50 mmb higher than during the false rally of 2015 and are they still increasing, it added. – SARAWAKVOICE.COM