Oil markets stable as markets tighten, but analysts expect volatility ahead

SINGAPORE: Oil markets were little changed on Friday, supported by ongoing supply cuts and strong demand which have resulted in a tightening market, although the prospect of rising US output capped prices.

Brent crude was at $63.81 per barrel at 0615 GMT, down 12 cents from its last close but within $1 of a more than two-year high of $64.65 reached earlier this week.

US West Texas Intermediate (WTI) crude was at $57.08 per barrel, down 9 cents but also not far from this week's more than two-year peak of $57.92 a barrel.

The high prices were a result of efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to tighten the market by withholding supplies, as well as strong demand and rising political tensions.

"Oil prices have rallied sharply over the past week ... The latest catalyst for this move higher was the sharp rise in geopolitical tensions last weekend, with growing confidence in an OPEC extension and strong oil demand fueling the rally previously," said US bank Goldman Sachs.

The strong demand is visible in Southeast Asia, where the nummber of tankers holding oil in storage around Singapore and Malaysia has halved since June.

"Inventory changes over recent months indicates that the supply/demand imbalance has improved," said William O'Loughlin, analyst at Rivkin Securities.

But there were some words of caution. "This (oil upward) move may be short-lived... It is possible that shale ... production can be brought back on stream relatively quickly," Morgan Stanley bank.