Oil prices up on short-covering, supply glut caps gains
Oil prices up on short-covering, supply glut caps gains
Oil jumps 1% on weaker dollar, but rise in US drilling drags
27 June, 2017, 11:25
Oil prices rose last Thursday after United States crude and gasoline stockpiles fell, but worries over whether Opec-led output cuts would be able to rein in a three-year glut continued to drag.
WTI for August delivery climbed as much as 59 USA cents to US$43.60 a barrel on the New York Mercantile Exchange, and was at US$43.47 at 1.58pm in Hong Kong.
Crude reached bear-market territory last week amid concern that the ongoing rebound in USA shale production is derailing efforts by other major producers to rebalance the market. "And while prices may not have held higher levels achieved after the cuts were announced, we have no doubt that prices would be far weaker without the efforts of OPEC and other cooperating non-OPEC producers".
US Shale Oil output is up around 10 per cent since past year, while places like Brazil have also hiked output. Iran was allowed a small increase to recover market share lost under Western sanctions.
The increase in USA drilling activity and shale production has mostly offset efforts by OPEC and other producers to cut output in a move to prop up the market.
One unknown factor that could prevent oil prices from falling further is the possibility that prices floundering in the mid-$40s actually puts a lid on shale production.
This story has not been edited by Firstpost staff and is generated by auto-feed. "I think they're overdoing it", said Phil Flynn, senior market analyst at Price Futures Group Inc.in Chicago.
He went on to note that one reason are signs of US shale production starting to slow, "particularly in the past couple of weeks" and that an inventory drop began sooner than expected. The benchmark was still set to end the first half of the year down almost 20 percent. "We look for a move toward $44.00 - $44.50 after closing near $43 before the weekend". "The added cooling demand should limit the rate of [U.S.] storage injections in the weeks ahead".
"On a speculative basis it's arguably worth going long here and playing for a bounce", Kilduff said.
The production cut deals are expected to mitigate the global oil supply glut to a certain degree. The 11 oil rigs added in the week to June 23 has taken the total count to 758, which is a huge increase from the 330 active oil rigs in the comparable week past year.
"U.S. production could jump to 10, maybe 10.5 million barrels a day by the end of the year, and when you add Libya, Nigeria and North Sea production, that will negate the Saudi-led cuts", said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.
"We have entered a period in which oil prices can dislocate from oil market fundamentals for longer periods of time than historically has been the case", the report read.
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