Oil Makes Modest Gains But Remains in a Tight Range
17 February 2017 - 2:50PM
Dow Jones News
By Jenny W. Hsu
Crude futures made moderate gains in Asia on Friday as
larger-than-expected growth in U.S. crude stocks and production
were overshadowed by news that the Organization of the Petroleum
Exporting Countries could consider extending its production cuts
for more months.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in March traded at $53.48 a barrel at 0202 GMT, up
$0.12 in the Globex electronic session. April Brent crude on
London's ICE Futures exchange rose $0.13 to $55.78 a barrel.
On Thursday, Reuters reported that OPEC sources said the cartel
could extend the six-month deal to cut supply, or make more severe
cuts, if oil stocks don't drop by around 300 million barrels.
According to the OPEC's latest oil report, commercial oil stocks
of the Organization for Economic Cooperation and Development
countries fell by 33.8 million barrels in December for the fifth
consecutive month, but at 2.9 billion barrels, it is still around
13 million barrels above the level a year ago and 299 million
barrels above the latest five-year average.
OPEC, along with other key oil producing countries including
Russia, agreed late last year to cut output by around 1.8 million
barrels a day, equivalent to around 2% of global production. The
agreement included the possibility to extend the cuts by another
six months.
The January data showed OPEC crude supply decreased by 890,000
barrels a day to average 32.14 million barrels a day, indicating a
90% compliance rate by the participating countries.
A person close to Saudi Arabia's oil ministry said the kingdom,
the world's largest oil exporter, was taking a wait and see
approach to whether OPEC should extend the deal. It is too soon to
tell whether the cartel will extend its agreement at its next
meeting in May, the person said.
"This is not deemed sufficiently surprising," said Tim Evans, a
Citi Futures analyst, who said more clarity should ensue after the
monitoring committee meets again in late March.
Talks of possibly extending the supply cut time frame come at
time when the U.S. production is showing a strong revival. U.S.
production is predicted to average 9.0 million barrels a day this
year and grow another 500,000 barrels a day next year.
However, some analysts such as Vyanne Lai at National Australia
Bank are forecasting a much faster growth rate, putting this year's
production at 9.3 to 9.4 million barrels a day.
She said the price collapse in the past two and a half years
have prompted U.S. oil producers to invest more money on innovation
and efficiency. Currently, some big U.S. oil companies have reduced
their break-even cost at $30 per barrel, while average-sized oil
companies can profit when oil prices sustain at around the $50
level.
"U.S. shale producers have a tendency of responding quickly to a
period of sustained stability in prices," she said.
Nymex reformulated gasoline blendstock for March--the benchmark
gasoline contract--rose 1 points to $1.5248 a gallon, while March
diesel traded at $1.6287, 4 points lower.
ICE gasoil for March changed hands at $493.00 a metric ton, up
$2.00 from Thursday's settlement.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
February 16, 2017 22:35 ET (03:35 GMT)
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