Oil prices fall 3% on global glut
Oil prices fell 3 per cent after data showed US production rose last week just as Opec exports hit a 2017 high.
london — Oil prices fell 3 per cent on Friday after data showed US production rose last week just as Opec exports hit a 2017 high, casting doubt over efforts by producers to curb oversupply.
Global benchmark Brent futures were down $1.43, or 3 per cent, at $46.68 a barrel at 1116 GMT, after falling to as low as $46.63, its weakest level in more than a week.
US West Texas Intermediate (WTI) crude futures traded at $44.14 a barrel, down $1.38 or 3 per cent. Their session low of $44.05 was also the lowest in over a week.
“We’re seeing some head scratching today. Following a sharp rally, which was mostly driven by short-covering, the failure of Brent to break back above $50 earlier in the week has once again given sellers appetite for sending it lower,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Weekly US government data showed on Thursday that US oil production rose one per cent to 9.34 million barrels per day (bpd), correcting a drop in the previous week that was down to one-off maintenance and hurricane shutdowns.
The rise in US output coincides with exports from the Organisation of the Petroleum Exporting Countries climbing for a second consecutive month in June to the highest this year.
$46.68 per barrel was the price of benchmark Brent futures in London
Russia, which is cooperating with Opec in a deal to stem oil production, said on Friday it was ready to consider revising the parameters of the deal if need be. President Putin, attending the G20 summit in Hamburg, said he wanted to continue cooperating with other countries to reduce price volatility.
The market largely ignored news from the US Energy Information Administration (EIA) that US crude inventories fell by 6.3 million barrels in the week to June 30 to 502.9 million barrels, the lowest since January.
The push-and-pull between bearish and bullish factors will keep volatility high, said Hans van Cleef, senior energy economist at ABN Amro. “In the near term, this leaves us with a volatile trading range of roughly $45-50 a barrel.”
If Opec was unable to balance the market, change would likely be forced on it by oil prices, said Morgan Stanley.
The US bank said a WTI price of $46 to $50 per barrel would likely prevent US production rising in the mid- to long-term, but “prices will need to be in the low $40s” for US output to fall significantly.
Morgan Stanley said it expected WTI to remain below $50 until mid-2018. — Reuters