Oil prices edged below $49 this morning but were still set for their first weekly gain in three weeks after Russia and Saudi Arabia agreed to work together to help rebalance the markets and after a surprisingly large drawdown in U.S. crude stocks, Reuters reports.
Brent and West Texas Intermediate crude futures were on course to gain about 5% this week following two consecutive weeks of declines. Brent crude was down $1.34 at $48.64 a barrel as of 10:22 a.m. after rising above $50 for the first time in two weeks on Thursday.
The International Energy Agency says it expects oil demand to finally exceed supply in the third quarter of 2016, meaning record global crude stockpiles should start falling.
But in a note this morning, analysts from Morgan Stanley say there were risks the market might not rebalance until later.
“Once again, we see an increasing probability for several unexpected bearish developments to come together, which could push off rebalancing (seasonally adjusted demand exceeding supply) to late 2017, or even 2018,” Morgan Stanley says.
Bank of America Merrill Lynch says it saw prices picking up toward the end of the year, with WTI prices reaching $54 per barrel, and any dip in prices would be a buying opportunity.
If OPEC and non-OPEC producers agree to implement measures to limit supply when they meet next month in Algeria, it should help the markets rebalance.
