Oil Ticks Higher But Outlook Still Lackluster
23 June 2017 - 1:38PM
Dow Jones News
By Jenny W. Hsu
Crude futures crept higher in Asia on Friday, but buying
interest continued to be plagued by a global oil glut despite
ongoing production cuts.
Overnight, oil prices rose modestly after plunging into the bear
market territory earlier in the week, but the bounce was mainly
based on sentiment, rather than fundamental drivers, said ANZ
Research.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in December traded at $45.15 a barrel at 0143 GMT, up
$0.26 in the Globex electronic session. January Brent crude on
London's ICE Futures exchange rose $0.44 to $46.59 a barrel.
For the near term, price volatility will likely prevail as
speculative traders base their moves on data, rather than trends,
analysts say.
"Potential buyers are firmly sitting on the fence because the
current steep contango makes it very costly to go long in the
market," said Ole Hansen, head of commodity strategy at Saxo Bank,
adding the market has become "very data dependent."
Energy investors will be monitoring the weekly U.S. rig count
due later Friday. If the count increases again, it would be the
23rd consecutive weekly climb, deepening concerns that U.S. output
is negating any cuts done by the Organization of the Petroleum
Exporting Countries and non-cartel producers like Russia.
However, U.S. production growth and crude inventories may show a
decline next week as inclement weather in the Gulf of Mexico has
shut a number of oil rigs and platforms, in a region responsible
for 17% of total U.S. production.
Any signs of deceleration in U.S. production would be a boon for
the market, which is still mired in surplus.
Meanwhile, the compliance level by countries that have joined in
on OPEC's curtailment plan reached 106% in May.
"This is a convincing demonstration of the willingness of all
participating countries to continue their cooperation until the set
goal is achieved," said the cartel's monitoring committee.
As well, there are growing voices among analysts that the next
logical step is for OPEC to include Nigeria and Libya to the
cutback deal. These two OPEC nations were exempted initially on the
account their output and exports were greatly blunted by years of
domestic armed conflicts.
"But both countries will inevitably argue that they are pumping
less oil than their potential," said Vivek Dhar, a commodities
strategist at Commonwealth Bank of Australia.
The committee's next meeting is scheduled to be held July 24 in
St. Petersburg, Russia.
Nymex reformulated gasoline blendstock was flat at $1.435 a
gallon, while July diesel gained 0.1% at $1.374. July ICE gasoil
slid 0.9% to $408.75 a metric ton.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
June 22, 2017 23:23 ET (03:23 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.