Oil Under Pressure as Global Inventories Remain Elevated
April 30 2017 - 11:43PM
Dow Jones News
By Jenny W. Hsu
Crude futures eased in Asia Monday dragged by concerns whether
ongoing production cuts by producers in the Middle East and Russia
was enough to offset the increasing U.S. oil being pumped into the
still oversupplied market.
Trading is expected to be muted across the board as several
markets in Asia and Europe are closed today for a public
holiday.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in June traded at $49.23 a barrel at 0202 GMT, down
$0.10 in the Globex electronic session. July Brent crude on
London's ICE Futures exchange fell $0.12 to $51.93 a barrel.
Oil prices rose over the weekend after traders closed out on a
recent raft of bearish bets. However, outlook is still downbeat as
U.S. shale producers continue to crank up their output. Latest data
from industry group Baker Hughes showed rigs drilling for oil in
the U.S. rose again by nine last week. At 697, the volume is double
from the low it fell to less than a year ago.
Analysts say the market is caught between the rising U.S.
production and the diminishing output from the Organization of the
Petroleum Exporting Countries and other heavyweights like Russia.
The OPEC-led effort to tighten the oil market has slowed down the
growth of global inventories but is still nowhere near the
five-year averages, a level that OPEC is striving for.
OPEC Secretary-General Mohammed Barkindo suggested the supply
cuts have had some success, with U.S. inventories falling for the
past three weeks, while global inventories increased less than
normal during the first quarter, said ANZ Research.
The general market expectation is for the consortium to further
curtail their production after June, but several questions still
loom, such as the length of the extension, quotas for the
individual producers, and the sustainability of the compliance
level.
The group will announce the details on May 25.
"If an extended production agreement is reached...then the
market would remain supported in the second half of the year," said
Stuart Ive, a client manager at the New Zealand-based OM
Financial.
Even though there have been some discouraging comments from some
OPEC members, such as Iran who said it has the ability to produce
more, analysts say the country is already near its maximum capacity
of 4 million barrels a day. Iran is exempt from the production cut
deal.
Brewing geopolitical tensions between North Korea and the U.S.
is also being closely watched by oil investors. During an interview
over the weekend, President Donald Trump left open the possibility
of military action against North Korea if the regime conducts
another missile test.
Nymex reformulated gasoline blendstock for June--the benchmark
gasoline contract was near flat at $1.5451 a gallon, while June
diesel gained 0.2% at $1.5083. ICE gasoil for May changed hands at
$453.75 a metric ton, down $0.25 from Friday's settlement.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
April 30, 2017 23:28 ET (03:28 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.