A weaker dollar and lower U.S. crude oil production for last week are pushing oil prices up this week to their seventh consecutive trading session in the black, but crude prices have dropped by double digits since the beginning of the year and are set to record their worst first-half performance since the first half of 1998.
At 7:57am EDT on Friday, WTI Crude was trading up 0.73 percent at US$45.26, while Brent Crude was up 0.59 percent to US$47.91.
Since OPEC decided last November to act as the market regulator by drawing down the glut, oil prices enjoyed a good run until around the end of the first quarter this year. But then, the market and investors started growing increasingly concerned that the market was not balancing fast enough and that OPEC's production cuts might not be able to kill the glut by the middle of this year.
Seeing that the production cut policy needed more time to translate into significant reduction in oversupply, OPEC decided to extend the cuts into March 2018. The oil market, however, had already priced in that extension and didn't buy OPEC's charm that it is doing "whatever it takes" to reduce the glut.
U.S. shale output has been rising faster than most expectations, OPEC producers Libya and Nigeria-exempt from the cuts-have started growing their respective crude outputs, and additional supply is coming from non-OPEC Brazil and Canada. Fears that rising supply elsewhere is effectively blunting the cartel's cuts returned to the market and prices dipped, most notably in the middle of last week, when they hit a ten-month low.
Since then, oil prices have been on a seven-day winning streak, and this week they are putting an end to a fifth consecutive losing week.
This week oil prices have been up on a weaker dollar and the EIA data that U.S. weekly crude oil production dropped to 9.250 million bpd in the week to June 23, from 9.350 million bpd the previous week. Related: The Downturn Is Over, But U.S. Oil Companies Face A Huge Problem
"The strength is driven by the weak dollar but in light of the rising Libyan production it will be temporary," Tamas Varga, analyst at London brokerage PVM Oil Associates, told Reuters.
Still, the price of oil is set to end a rather grim first half. So far this year, Brent prices have dropped by 16 percent, the worst since 1998, when the price of Brent declined 19 percent in the first half.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More