After oil prices hit the lowest in seven months earlier this week, they were tentatively rising early on Friday, but were still on course to post the fourth consecutive week of losses—the longest weekly losing streak since August 2015—as concerns over the stubbornly high global oversupply continue to trump OPEC’s efforts to rebalance the market.
As of 7:20am EDT on Friday, WTI Crude was up 0.65 percent at US$44.75, while Brent Crude was trading up 1.04 percent at US$47.41. Both the prices of WTI and Brent have dropped by around 13 percent since May 25, when OPEC said it was rolling over the cuts into March 2018.
A flurry of bearish news for the oil market followed one after the other this past week, sending oil prices even lower than at the levels they were trading before OPEC announced its production cut agreement in late November.
First, OPEC said in its Monthly Oil Market Report on Tuesday that its production actually increased in May compared to April, with exempt Libya and Nigeria leading the output gains, followed by non-complying Iraq. The cartel admitted that “rebalancing of the market is underway, but at a slower pace, given the changes in fundamentals since December, especially the shift in US supply from an expected contraction to positive growth.”
Then, on Wednesday, the International Energy Agency (IEA) further dampened bull spirits, pointing to weak fundamentals.
On top of that, the U.S. EIA reported on the same day a minor draw in crude inventories, but with worrying increased gasoline inventories.
“There is really no bullish twist to the latest U.S. data,” Michael Dei-Michei, head of research at Vienna-based consultants JBC Energy, told Bloomberg.
“Implied crude production seems to have moved upwards at a rather rapid pace, U.S. gasoline demand has taken a turn to the downside just as the summer driving season starts and total U.S. oil stocks have not drawn for two weeks,” he noted. Related: The Downturn Is Over, But U.S. Oil Companies Face A Huge Problem
Then, cut-exempt Libya said that it was targeting production of 1 million bpd by end of July, putting further pressure on the fear of continuously rising global supply, and not only from U.S. shale.
Later today, the U.S. weekly rig count data could reverse the tentative rise of oil prices yet again.
“Oil is unlikely to find solace into the weekend either, with tonight’s Baker Hughes Rig Count expected to deliver its now weekly increase of operational rigs,” Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore, told Reuters.
By Tsvetana Paraskova for Oilprice.com
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