Oil Creeps Higher
25 March 2017 - 8:03AM
Dow Jones News
By Sarah McFarlane, Alison Sider and Jenny W. Hsu
Global crude futures edged higher Friday as traders turned their
attention to a meeting of a committee monitoring OPEC's production
cuts, amid growing concerns that the group's efforts haven't been
enough to drain a world-wide glut.
U.S. crude futures settled up 27 cents, or 0.57%, at $47.97 a
barrel on the New York Mercantile Exchange. Brent, the global
benchmark, rose 24 cents, or 0.47%, to $50.80 a barrel on ICE
Futures Europe.
Market participants have become increasingly anxious that an
agreement by the Organization of the Petroleum Exporting Countries
and a group of non-OPEC heavyweights to cut output by 1.8 million
barrels a day isn't having an effect on the overhang of oil that
has weighed on prices since 2014.
Crude prices have tumbled around 11% this month, as rising U.S.
production has undercut OPEC's efforts and swelling inventories in
the U.S. have raised doubts about whether the cutbacks are working.
Despite the uptick Friday, crude ended the week down 2.72%.
"There's a lot of uncertainty about whether the cut is going to
be in place long enough to alter the fundamental picture," said
Gene McGillian, research manager for Tradition Energy.
Investors are now focusing on a meeting this weekend of a
committee tasked with overseeing compliance with the production cut
agreement, watching for signals that the deal will be extended when
OPEC meets in May. The prospect of bullish commentary from oil
ministers in the coming days likely helped pause crude's fall after
four straight days of losses, analysts and traders said.
"You've got an OPEC meeting -- there's always a surprise
potential out of it," said Donald Morton, senior vice president
senior vice president at Herbert J. Sims & Co., who runs an
energy trading desk. "It could go either way very quickly from
here."
The market shook off data showing that the number of rigs
working in the U.S. rose for a 10th straight week, with 21
additional oil rigs, according to oilfield services firm Baker
Hughes Inc. But persistently high levels of crude inventories in
the U.S. coupled with relentlessly growing output have shaken the
market in recent weeks.
"[The] U.S. is acting as a bellwether for the global stock
overhang. With little sign of an imminent rebalancing in U.S. crude
inventories, the near-term risks for oil prices remain skewed to
the downside," said brokerage PVM.
That will put more pressure on the monitoring committee
overseeing compliance with the production-cut agreement as it meets
in Kuwait this weekend.
"I think that they know they are going to be under pressure,
prices aren't much higher than when the first deal was struck, and
stocks are not much lower, so for every reason that you had to do
the original deal, all those reasons are still valid," said Tom
Pugh, a commodities analyst at Capital Economics.
"The sticking point is going to be Iran, Saudi will want them to
join in any cuts, I think that will probably result in a compromise
where Iran agrees to freeze its production at current levels," he
added.
The original deal among OPEC members agreed on Nov. 30 allowed
Iran a limited output increase.
Saudi Arabia, which is shouldering the bulk of the cuts, will
likely lobby to extend the plan, especially after ratings company
Fitch cut the kingdom's credit rating to A+ from AA- and lowered
the outlook to negative from stable, citing a worsening government
deficit caused by declining oil prices, said Stuart Ive, a client
manager at OM Financial.
Gasoline futures rose 1.5 cents, or 0.82%, to $3.0760 a gallon
Friday. Diesel futures rose 0.75 cent, or 0.5%, to $1.4976 a
gallon.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com, Alison
Sider at alison.sider@wsj.com and Jenny W. Hsu at
jenny.hsu@wsj.com
(END) Dow Jones Newswires
March 24, 2017 16:48 ET (20:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.