Oil steadies above $60 after hitting monthly high

Brent settled at $61.17 per barrel on Wednesday after a higher than expected US crude inventory draw

Workers at a Colgate Energy site in Texas. Goldman Sachs cautioned that shale productivity improvements were on the decline in shale plays such as Eagle Ford. Bloomberg

Oil prices held steady above $60 a barrel after finishing at the highest level in a month on Wednesday following a bigger than expected drawdown in US inventory.

Brent was trading slightly lower at $60.93, down 0.39 per cent at 12.12pm UAE time, while West Texas Intermediate benchmark was down 0.59 per cent at $55.64 per barrel. Brent settled at $61.17 per barrel on Wednesday after the US Energy Information Administration reported a weekly decline in US stockpiles for the first time in six weeks.

Crude stocks were down 1.7 million barrels for the week ending October 18 while oil supply from the country's Strategic Petroleum Reserve fell by a million barrels during that period.

Data from the industry-funded American Petroleum Institute on Tuesday showed US crude inventory levels rose 4.5 million barrels to 437 million barrels for the week ending October 18, beating analysts' estimates by 2.2 million barrels.

Crude has languished in largely bearish territory over the past month after hitting $69.02 on September 16, after attacks on Saudi Aramco oil processing facilities took 5.7 million barrels per day of Saudi output offline – the equivalent of 5 per cent of global supply. Aramco's speedy recovery after the attacks, as well as revisions to global crude demand growth by the International Energy Agency, have kept prices depressed.

Markets were also bolstered by a note from investment bank Goldman Sachs which suggested a rally in prices was likely towards the end of the year as US output growth would be stymied by lack of investment.

The bank revised its forecast for the growth of US output to 700,000 bpd in 2020 from a previous estimate of 1 million bpd, citing a slowdown in drilling.

"Initial 2019 productivity data suggests that shale productivity improvements appear to be decelerating across key US oil shale plays and deteriorating in the Eagle Ford Shale," the bank said on Wednesday.

Goldman sees some upside risk to its forecast of $62 per barrel by the end of the year.

“Nevertheless, absent growth or geopolitical tensions escalating into meaningful shocks, we expect that Brent oil prices are likely to continue trading in 2020 around our $60 (a barrel) forecast," it said.

Actions by Opec+, the alliance led by Saudi Arabia and Russia which has been cutting back 1.2 million bpd since the beginning of the year, will also continue to keep the markets tight, Goldman said.

Brent futures were caught in the middle of “worsening growth expectations and rising Middle East tensions", Goldman said.

Opec, set to meet in Vienna in early December to review the current agreement –which is expected to hold until March 2020 – was said to be considering deeper cuts, according to Reuters.

Russian Energy Minister Alexander Novak, however, dismissed the rumours on Wednesday saying no formal proposals were put forward to revise the deal.