LONDON (Reuters) – Oil prices steadied just below two-year highs on Thursday, supported by supply cuts by major exporters, but analysts said the market could be vulnerable to a sell-off after several months of gains.
Brent crude oil was up 20 cents at $63.69 a barrel by 1120 GMT. On Tuesday, Brent reached an intra-day high of $64.65, its highest since June 2015.
U.S. light crude was 15 cents higher at $56.96, just shy of this week’s more than two-year high of $57.69 a barrel.
Traders said a rally that has pushed up Brent by more than 40 percent since July may have run its course.
“Prices may have reached a short-term peak,” said Fawad Razaqzada, analyst at futures brokerage Forex.com.
Prices have been supported by moves led by the Organization of the Petroleum Exporting Countries and Russia to limit supplies in order to tighten the market.
OPEC will discuss output at a meeting on Nov. 30, and is expected to extend the limits beyond their expiry in March 2018.
“With the OPEC/non-OPEC deal extension beyond March 2018 a certainty, prices may become stronger and temporarily reach the $65-$70 per barrel range in 2018,” said energy consultancy FGE.
Despite this, some analysts say the price rally of the past months may have run its course, at least for now.
“As we get into 2018 and 2019, more oil is coming onto the market, a lot of it from U.S. tight oil,” said Simon Flowers, chief analyst at Wood Mackenzie energy consultancy.
“So this (rally) will prove quite short-lived and we’ll see the price back into $50-$55 a barrel over the next year or two.”U.S. crude stockpiles rose 2.2 million barrels in the week to Nov. 3, to 457.14 million barrels, the Energy Information Administration said on Wednesday.
U.S. crude production rose 67,000 barrels per day to 9.62 million bpd, the highest for decades.
Output looks set to rise further. Texas issued 997 oil and gas drilling permits last month, up nearly 17 percent versus the same month a year ago.
Global fuel consumption remains strong, although the latest figures from top importer China were below expectations.
Key for the last weeks of 2017 is whether traders remain confident about their huge bets on further price rises, or if they sell out, satisfied with recent strong gains.
“It doesn’t matter how bullish the fundamentals are … when an asset goes vertical there is always room for a pullback and consolidation of recent price moves,” said Greg McKenna, chief market strategist at brokerage AxiTrader.