(Reuters) Oil prices weakened following early gains on Wednesday, but remained underpinned by tightening supply and strong global demand.
Tighter fundamentals have lifted both crude futures benchmarks about 13% above levels in early December, helped by production curbs by OPEC and Russia, as well as by healthy demand growth.
Brent crude futures LCOc1 were at $68.90 a barrel, down 25 cents from the last close, after hitting $69.37. Brent on Monday rose to $70.37 a barrel, its highest since December 2014.
US West Texas Intermediate (WTI) crude futures CLc1 were at $63.63 a barrel, down 10 cents on the day and down from an earlier high of $63.96. WTI hit $64.89 on Tuesday, also the highest since December 2014.
“Currently there is no reason to believe that there has been a significant change in the underlying fundamental sentiment and the sell-off is, so far, viewed as a technical correction,” said Tamas Varga, analyst with PVM Oil Associates in London.
US shale oil output expected to rise
On Tuesday, the US Energy Information Administration said it expected the country’s oil output to rise in February, with production from shale rising by 111,000 barrels per day (bpd) to 6.55 million bpd.
US crude output C-OUT-T-EIA is expected to soon break through 10 million bpd, challenging top producers Russia and Saudi Arabia.
Norbert Ruecker, head of commodity research at Swiss bank Julius Baer, also said that “hedge fund expectations for further rising prices have reached excessive levels,” threatening prices.