Oil Prices Still Falling as Market Doubts Crude Glut Is Going Away
April 25 2017 - 11:56AM
Dow Jones News
By Alison Sider, Sarah McFarlane and Jenny W. Hsu
Oil prices continued their downward slide Tuesday amid continued
doubts that the global crude glut is being drained.
Oil is on track for its seventh consecutive day of declines,
which would be its longest losing streak since March. That reflects
recent investor concern about the strength of rebounding U.S. oil
production and ebbing faith that the Organization of the Petroleum
Exporting Countries can effectively lead the market back into
balance after several years of oversupply.
"Without signs that the overhang in the market is being
eliminated, the market is showing real trouble justifying plus-$50
oil," said Gene McGillian, research manager for Tradition
Energy.
U.S. crude futures were recently down 16 cents, or 0.33%, to
$49.07 a barrel on the New York Mercantile Exchange. Brent, the
global benchmark, was down 10 cents, or 0.19%, at $51.50 a barrel
on ICE Futures Europe.
OPEC and other major producers have agreed to cut production by
1.8 million barrels a day in the first half of 2017. But because
stocks have remained high, traders and investors are now watching
to see whether the cartel will extend the deal when it meets in
May.
"Until OPEC announces an official decision on whether to extend
the production cuts, the main focus of the market will be on that,"
said Nelson Wang, an energy analyst at CLSA.
And with uncertainty about whether the cuts will continue,
market participants have turned their focus to signs that U.S.
production will come on strong. Analysts say the recent downtrend
may persist as U.S. oilfield-service companies, namely drillers,
still have plenty of spare capacity.
Mr. Wang estimates only around 70% of available oil rigs in the
U.S. are currently in operation despite persistent growth this year
in drilling activity there. Baker Hughes's closely watched rig
count is at its highest level in nearly two years.
"This means there is a lot of upside risk to U.S. supplies," he
said.
Gasoline futures fell 1.46 cents, or 0.9%, to $1.6068 a gallon.
Diesel futures fell 0.88 cent, or 0.59%, to $1.5339 a gallon.
Write to Alison Sider at alison.sider@wsj.com, Sarah McFarlane
at sarah.mcfarlane@wsj.com and Jenny W. Hsu at
jenny.hsu@wsj.com
(END) Dow Jones Newswires
April 25, 2017 11:41 ET (15:41 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.