Economists bullish on crude oil prices

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The reactiveness in oil prices, even on production cut rumours, suggested that market-watchers were looking for reasons to take bullish positions once again.

The reactiveness in oil prices, even on production cut rumours, suggested that market-watchers were looking for reasons to take bullish positions once again.

KUCHING: OCBC Bank is bullish on the movement of crude oil price this year, believing that the commodity was undervalued below US$30 per barrel.

Production cut by omajor oil producing countries coupled with demand growth will push crude oil price to move up.

OCBC Bank’s economist Barnabas Gan in a report yesterday said the group continued to stay bullish on oil prices, opining that  a production cut will likely happen in 2016.

“This event, coupled with demand growth to stay positive, would rally both (US benchmark) West Texas Intermediate (WTI) oil prices and London benchmark Brent (crude oil price) to our year end forecast of $50 per barrel,” he said in a note to client yesterday.

Gan stressed that oil prices were extremely reactive to any possibility for a production cut.

He observed oil prices have rallied about 20 per cent over the last three days – a move that reflected market expectations for a production cut.

He believed the reactiveness in oil prices, even on production cut rumours, suggested that market-watchers were looking for reasons to take bullish positions once again.

Nonetheless, Gan noted some green-shoot signs of upside risk to oil prices, such as the uptick in US Commodity Futures Trading Comission (CFTC)  net-long speculative positions since the start and the steeper upward sloping futures curve compared a month ago.

Both indicators, he said, suggested the increase in buying interest and expectations for oil prices to rally, an unsurprising conviction given how low oil prices were at current juncture.