Oil prices set to end week higher on out­put freeze, but glut looms

The Pak Banker - - MARKETS/SPORTS -

Oil prices slid on Fri­day but are set for their first weekly in­crease this month as talk of a co­or­di­nated plan by pro­duc­ers to freeze out­put lev­els was tem­pered by a record build in U.S. crude in­ven­to­ries.

Brent fu­tures LCOc1 were down 35 cents at $33.93 a bar­rel by 0957 GMT, with U.S. crude CLc1 slip­ping by 36 cents to $30.41. Oil prices had risen by more than 14 per­cent ear­lier in the week on Saudi Ara­bia and Rus­sia's agree­ment to freeze out­put at Jan­uary lev­els.

While Ira­nian Oil Min­is­ter Bi­jan Zan­ganeh wel­comed the plan, he fell short of com­mit­ting to it and Ira­nian sources told Reuters that cap­ping out­put is not enough to re­bal­ance the mar­ket.

Saudi Ara­bia re­it­er­ated that it has no plans to cut out­put and will con­tinue to pro­tect its mar­ket share.

"If other pro­duc­ers want to limit or agree to a freeze in terms of ad­di­tional pro­duc­tion, that may have an im­pact on the mar­ket, but Saudi Ara­bia is not pre­pared to cut pro­duc­tion," for­eign min­is­ter Adel al-Jubeir told Agence France-Presse in an in­ter­view on Thurs­day.

Iraq's oil min­is­ter Adel Ab­dul Mahdi said on Thurs­day that talks would con­tinue be­tween OPEC and non-OPEC mem­bers to find ways to re­store "nor­mal" oil prices af­ter a meet­ing in Tehran on Wed­nes­day.

A record build in U.S. crude in­ven­to­ries last week stoked con­cerns over per­sis­tent global over­sup­ply. Crude stocks rose by 2.1 mil­lion bar­rels to a peak of 504.1 mil­lion, data from the U.S. govern­ment's En­ergy In­for­ma­tion Ad­min­is­tra­tion (EIA) showed on Thurs­day. "The mar­ket is ex­pect­ing con­tin­u­ing in­ven­tory builds," said Tony Nu­nan, oil risk man­ager at Ja­pan's Mit­subishi Corp in Tokyo. The re­cov­ery at the back end of the WTI curve this week is prompt­ing U.S. shale pro­duc­ers, for the first time in months, to in­quire and place new hedges to lock in 2017 prices of around $45 a bar­rel.

The ac­tiv­ity re­flects ex­pec­ta­tions of grow­ing in­vestor and len­der pres­sure to safe­guard heavy debt re­quire­ments down the road, as well as de­clin­ing drilling costs, al­low­ing com­pa­nies to break even at lower prices.

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