Oil up on weaker dol­lar, sup­ply glut caps gain

Tehran Times - - ENERGY -

Oil prices rose for a fourth con­sec­u­tive ses­sion on Tues­day boosted by a weaker dol­lar and in­vestors cover­ing short po­si­tions, but wor­ries over per­sis­tent over­sup­ply capped gains.

Brent crude fu­tures, the in­ter­na­tional bench­mark for oil prices, had gained 25 cents to $46.08 per bar­rel by 0901 GMT.

U.S. West Texas In­ter­me­di­ate (WTI) crude fu­tures were up 23 cents at $43.61 per bar­rel.

The gains mean the mar­ket is up slightly so far this week, after spend­ing much of the last month in neg­a­tive ter­ri­tory.

The dol­lar fell 0.1 per­cent against a bas­ket of six ma­jor cur­ren­cies, prop­ping up oil, ahead of a speech by U.S. Fed­eral Re­serve Chair Janet Yellen.

“Short-term fi­nan­cial in­vestors also sig­nif­i­cantly scaled back their net long po­si­tions in Brent on the ICE last week... and find them­selves at their low­est level in a year and a half,” Com­merzbank said in a re­search note.

“Short po­si­tions have soared to a new record high, hav­ing in­creased more than four-fold since the begin­ning of the year.”

The Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries and its part­ners have been try­ing to re­duce a global crude glut with pro­duc­tion cuts. OPEC na­tions and 11 other ex­porters agreed in May to ex­tend cuts of 1.8 mil­lion bar­rels per day (bpd) un­til March 2018.

De­spite the cuts, which started in Jan­uary, mar­kets re­main well supplied due to ris­ing out­put else­where.

OPEC mem­bers Nige­ria and Libya are ex­empt from the cuts and have raised pro­duc­tion. OPEC mem­ber Iran was also al­lowed a small in­crease to re­cover mar­ket share lost un­der Western sanc­tions over its nu­clear pro­gram.

Libya’s oil pro­duc­tion rose to 935,000 bpd, up from 885,000 bpd last week, a Libyan oil source said on Tues­day. Mean­while Nige­ria’s pro­jected Au­gust ex­ports are at their high­est since March 2016 at around 2 mil­lion bpd.

Adding to the bear­ish sup­ply out­look is an ap­par­ent glut in U.S. East Coast prod­uct sup­plies.

Colo­nial Pipe­line Co said that de­mand on its main dis­til­late line fell be­low ca­pac­ity for the first time in nearly six years as the East Coast re­mained awash in fuel.

Mean­while, U.S. shale oil out­put has risen about 10 per­cent since last year to 9.4 mil­lion bpd, with the num­ber of U.S. oil rigs in op­er­a­tion at the high­est in more than three years.

“Traders are also look­ing ahead to the EIA En­ergy Con­fer­ence in Wash­ing­ton, where U.S. shale oil pro­duc­ers are ex­pected to give their view of cur­rent mar­ket con­di­tions,” ANZ bank said.

An­a­lysts at Bank of Amer­ica-Mer­rill Lynch said de­mand was not grow­ing quickly enough to ab­sorb out­put, es­pe­cially since im­ports in Asia are stut­ter­ing.

A fuel glut in China, a han­gover from de­mon­e­ti­za­tion in In­dia, and an age­ing, de­clin­ing pop­u­la­tion in Ja­pan are hold­ing back crude oil de­mand growth in three of the world’s top four oil buy­ers.

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