Oil posts slight gain after falling into bear market
LONDON (Bloomberg) -- Oil prices recovered after falling into a bear market amid speculation rising U.S. output will blunt OPEC-led efforts to trim a global glut.
Futures climbed 0.5% in New York, but still traded below $43/bbl. U.S. oil production increased to the highest since August 2015, according to a report from the EIA. Crude and gasoline stockpiles declined last week. Brent in London closed Wednesday more than 20% below its January peak, also entering a bear market.
Oil in New York has retreated to a 10-month low amid concerns that rising global supply will offset production cuts from OPEC and its partners including Russia. Reaching a consensus on further output cuts will be difficult, according to Iran’s Oil Minister Bijan Namdar Zanganeh. On Tuesday, a technical committee of OPEC and non-OPEC members is said to have discussed the increasing production in Libya and Nigeria.
“The risk sentiment in general is turning a bit,” Jens Pedersen, analyst at Danske Bank said. “The oil market will likely focus on where the breakeven is for U.S. shale oil producers and whether we will begin to see a drop in the rig count in response to these lower oil prices.”
WTI for August delivery rose $0.21 to $42.74/bbl on the NYME. Total volume traded was about 11% above the 100-day average.
Brent for August settlement was $0.36 higher at $45.18/bbl on the ICE Futures Europe exchange. Prices lost $1.20, or 2.6%, to $44.82 on Wednesday, the lowest close since Nov. 14. Brent traded at a premium of $2.41 to WTI.
Libya is pumping the most oil in four years, an official at the National Oil Corp said earlier this week, while in Nigeria a major export terminal restarted after a 15-month halt caused by sabotage. Kuwait’s oil minister Issam Almarzooq asked producers “to do more” to help OPEC’s agreement succeed.
U.S. oil production rose by 20,000 bpd last week to 9.35 million, the EIA reported Wednesday. While crude stockpiles slid by 2.45 MMbbl to 509.1 million, a steeper decline than forecast in a Bloomberg survey, inventories remain about 100 MMbbl above the five-year average.
Oil Market News
The gain in U.S. output is more than OPEC expected and is contributing to the decline in crude prices, Iran’s Zanganeh said Wednesday on state radio. OPEC needs to cut a further 700,000 bpd to boost oil to $50/bbl, FGE’s Fereidun Fesharaki said. Energy markets need to brace for more assertive Saudi Arabian foreign policy that could threaten regional stability in the heart of the global oil industry after Mohammed bin Salman’s appointment as crown prince.
