Oil prices rise early Friday on potential OPEC cut extension(Update 1)

  • Business
  • Thursday, 27 Apr 2017

Affin Hwang Research said across the value chain, production players will be the first to benefit from higher oil prices due to their oil-producing fields.

SINGAPORE: Oil prices rose on Friday but were still on track for a second straight weekly loss on concerns that an OPEC-led production cut has failed to significantly tighten an oversupplied market.

U.S. West Texas Intermediate (WTI) crude futures were trading at $49.34 per barrel at 0217 GMT, up 37 cents, or 0.76 percent, from their last close. However, WTI is still set for a small weekly loss and is around 8 percent from its April peak.

Brent crude futures were at $51.77 per barrel, up 33 cents, or 0.64 percent. Brent is almost over 8.5 percent below its April peak and is also on track for a second week of declines.

Traders said that Friday's rises came on the back of OPEC saying it was keen to find a deal that would ensure a drawdown of excess fuel supplies.

Such a deal would likely mean an extension of a pledge by the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year.

Despite this, ANZ bank said on Friday "the market (is) becoming increasingly impatient with the rebalancing," adding that OPEC was under pressure to extend the production cut agreement.

"Even though inventories have started to fall, they remain at elevated levels... Stocks have settled into the 62-65 days consumption or approximately 2.98 billion barrels," ANZ bank said in a note into OPEC's cuts on Friday.

This compares with the five-year average of 55 days' worth of consumption that Saudi Arabia wants to achieve.

In order to achieve this, ANZ said it expected OPEC to extend its cuts beyond the first half of 2017, although it added that "there is some risk that non-OPEC producers (such as Russia) may baulk at the suggestion."

The ongoing supply overhang is in large part due to a relentless rise in U.S. production, which has risen by 10 percent since mid-2016 to 9.27 million bpd.

And analysts expect U.S. production to keep rising this year.

Consultancy Rystad Energy expects U.S. shale oil output to grow by 100,000 bpd each month for the rest of this year and into 2018, well above estimates by the U.S. Energy Information Administration for monthly gains of about 29,000 bpd in 2017 and 57,000 bpd in 2018.

Outside the United States, rising output in Libya, an OPEC-member exempt from the cuts, was adding to plentiful supplies. - Reuter

Earlier repor:

Oil prices felled by Libyan oil restart and weak gasoline demand

NEW YORK: Crude prices were slightly lower after a volatile session on Thursday, as the restart of two key Libyan oilfields and concerns about lackluster gasoline demand fed concern over whether major oil producers can alleviate the glut of global inventories.

Libya's Sharara and El Feel oilfields, which can produce nearly 400,000 barrels per day (bpd), returned to production after protests blocking pipelines ended.

U.S. gasoline futures led the energy complex lower in choppy trading, at one point hitting its lowest level seasonally in eight years after data on Wednesday showed inventories rose by the most in nearly three months.

Brent crude settled down 14 cents a barrel at $51.68. U.S. light crude was down 37 cents to $49.25 a barrel.

“Gasoline is kind of keeping crude from going up very much," said James Williams, president of energy consultant WTRG Economics in London, Arkansas.

U.S. gasoline tumbled almost 2 percent to $1.559 a gallon.

"Gasoline is leading the way lower with ample stocks, lower demand compared to last year, and an increase in gas(oline) stocks on the east coast," said Anthony Headrick of CHS Hedging.

“For the last four weeks gas demand is down 1.8 percent from last year.”

Global crude oil inventories have remained high, in part because of increased production from the United States. At 9.27 million bpd it is at its highest since August 2015, according to government data.

Amid concerns about the persistent global oil glut the Organization of the Petroleum Exporting Countries and Russia are in talks to extend a six-month deal to cut 1.8 million bpd into the second half of the year.

OPEC Secretary-General Mohammad Barkindo said although the oil oversupply was declining, stocks needed to fall further, in comments that pointed to an extension in cuts.

Barkindo did not comment directly on whether the cut would be extended, but he said efforts were under way led by Saudi Energy Minister Khalid al-Falih, who is OPEC president in 2017, to get a consensus before ministers meet in Vienna on May 25.

The International Energy Agency said in its latest monthly market report that oil stocks in industrialized countries stood at around 3.06 billion barrels at the end of February, some 336 million barrels above the five-year average.- Reuters

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