Oil Trades in Narrow Range
20 September 2017 - 7:23AM
Dow Jones News
By Christopher Alessi and Alison Sider
Oil prices faltered Tuesday, giving up gains in earlier trading
as investors weighed the possibility that OPEC will extend its
production cuts again against the prospect of rising U.S. oil
output at higher prices.
U.S. crude futures fell 43 cents, or 0.86%, to $49.48 a barrel
on the New York Mercantile Exchange, after climbing as high as
$50.42 in earlier trading. Brent, the global benchmark, fell 34
cents, or 0.61%, to $55.14 a barrel on ICE Futures Europe.
"We're zigzagging in the range," said Michael Hiley, a trader at
LPS Futures. "We failed the highs from last week and are back down
into the same range we've been in for three days."
Prices were buoyed in earlier trading by a weaker dollar and
signals from Iraq's oil minister that the country could be open to
extending OPEC's production-cut agreement through next year. But
analysts and traders say that $50 a barrel remains a staunch
resistance point for U.S. crude futures amid a persistent glut that
could begin growing again next year.
"The $50 to $55 range has kind of become the new target range --
when you get there, that's when you start to see some rigs brought
online," said Robbie Fraser, an analyst at Schneider Electric. Any
time oil prices approach that level "there's always that secondary
move to sell," Mr. Fraser said.
OPEC and 10 producers outside the cartel first agreed late last
year to cap production at around 1.8 million barrels a day lower
than peak October 2016 levels, part of an effort to alleviate the
global oil glut and boost prices. The deal was extended in May
through March 2018, but has been hindered by both a lack of
compliance by some signatories and steady U.S. shale output.
Iraqi oil minister Jabar al-Luaibi said Tuesday that Iraq and
other members of the Organization of the Petroleum Exporting
Countries are considering options that include a proposal for the
cartel's output cut deal to run through 2018 instead of expiring as
planned in March.
"All in all, the outlook seems to be bright and prices are
rising," Mr. al-Luaibi said during an industry event in the United
Arab Emirates.
Some analysts remain skeptical. In a report Monday, the U.S.
Energy Information Administration said output from shale formations
is likely to rise by 79,000 barrels a day in October -- the 10th
consecutive monthly increase.
"This will make it more difficult for OPEC to achieve the
desired market balance," analysts at Commerzbank wrote in a
research note.
"News that Iraq is giving positive signals about supporting
deepening cuts" is helping oil prices, said Nitesh Shah,
commodities director at asset management firm ETF Securities. But
Iraq "hasn't complied with its portion of the quota since this
started so [prices] could come off very quickly," he cautioned.
While Iraq's crude production dropped by 10,000 barrels a day in
August, its compliance rate was "still comparatively low," at 39%,
according to a recent report from the International Energy Agency.
Iraq's oil minister maintains that his country is "fully compliant"
with the deal.
OPEC and non-OPEC participants are to meet in Vienna on Friday
to review compliance with the deal, though investors and analysts
widely expect that any decision on further cuts won't come until
OPEC's official annual meeting in November.
Among refined products, gasoline futures fell 1.36 cents, or
0.82%, to $1.6550 a gallon. Diesel futures rose 0.70 cent, or
0.39%, to $1.7726 a gallon.
The American Petroleum Institute, an industry group, said late
Tuesday that its own data for the week showed a 1.4 million-barrel
increase in crude supplies, a 5.1 million-barrel fall in gasoline
stocks and a 6.1 million-barrel decrease in distillate inventories,
according to a market participant.
--Summer Said contributed to this article.
Write to Christopher Alessi at christopher.alessi@wsj.com and
Alison Sider at alison.sider@wsj.com
(END) Dow Jones Newswires
September 19, 2017 17:08 ET (21:08 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.