Oil Prices Up as Bigger Producers Stick to Cuts
June 23 2017 - 12:37PM
Dow Jones News
By Georgi Kantchev, Jenny W. Hsu and Timothy Puko
Oil prices ticked higher Friday, capping a tumultuous week for a
market that continues to be plagued by a global glut.
Light, sweet crude for August delivery recently gained 35 cents,
or 0.8%, to $43.09 a barrel on the New York Mercantile Exchange.
Brent, the global benchmark, gained 35 cents, or 0.8%, to $45.57 a
barrel on ICE Futures Europe. Despite the gains, both are on pace
for their fifth-straight weekly loss, about 3.7%.
Signs that big producers are abiding by their deal to limit
output and weather-related output challenges in the U.S. supported
prices. The recent moves higher came after crude plunged into a
bear market this week for the first time since last summer, as the
oversupply is so far proving immune to the limits set by the
Organization of the Petroleum Exporting Countries and its
big-producer allies including Russia.
"Yes, we remain long-term bearish, but traders should be weary
of selling down here," the Chicago brokerage iiTrader told clients
in a note Friday. "Sentiment is a little too bearish at this moment
and ahead of the weekend."
A monitoring committee made up of OPEC members and producers
outside the group on Thursday said that compliance to the deal
reached 106% in May, the highest since the deal was first clinched
late last year.
In the 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, analysts say. According to
JBS Energy, 300,000 barrels a day of production were shut in.
Any signs of deceleration in U.S. production would support the
market, which is still mired in surplus. But for now, many analysts
remain pessimistic about oil's outlook.
"It is doubtful whether the end of the downward spiral -- a
barrel of Brent has plunged by 17% or around $9 over the past four
weeks -- has already been reached," said analysts at
Commerzbank.
High global oil inventories are "raising market concerns about
the efficacy of OPEC market management," said Jason Gammel, analyst
at Jefferies. "We remain of the view that inventories will [decline
in the second half of the year], but empirical evidence of this is
likely necessary for oil prices to inflect into an upward
trend."
Later Friday, energy investors will be focused on the weekly
U.S. rig count. If the count, which is a rough proxy for the
activity in the industry, increases again, it would be the 23rd
consecutive weekly climb, deepening concerns that U.S. output is
offsetting the OPEC cuts.
Analysts expect U.S. production to climb to a record next year,
potentially even vaulting American producers ahead of Saudi Arabia
in daily output.
Gasoline futures recently gained 0.2% to $1.437 a gallon and
diesel futures gained 0.5% to $1.3787 a gallon.
Write to Georgi Kantchev at georgi.kantchev@wsj.com, Jenny W.
Hsu at jenny.hsu@wsj.com and Timothy Puko at tim.puko@wsj.com
(END) Dow Jones Newswires
June 23, 2017 12:22 ET (16:22 GMT)
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