Oil prices rise on potential OPEC cut extension, but face second weekly loss
SINGAPORE Oil prices rose on Friday but were still on track for a second straight weekly loss on concerns that an OPEC-led production cut has failed to significantly tighten an oversupplied market.
U.S. West Texas Intermediate (WTI) crude futures were trading at $49.34 per barrel at 0217 GMT, up 37 cents, or 0.76 percent, from their last close. However, WTI is still set for a small weekly loss and is around 8 percent from its April peak.
Brent crude futures were at $51.77 per barrel, up 33 cents, or 0.64 percent. Brent is almost over 8.5 percent below its April peak and is also on track for a second week of declines.
Traders said that Friday’s rises came on the back of OPEC saying it was keen to find a deal that would ensure a drawdown of excess fuel supplies.
Such a deal would likely mean an extension of a pledge by the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year.
Despite this, ANZ bank said on Friday “the market (is) becoming increasingly impatient with the rebalancing,” adding that OPEC was under pressure to extend the production cut agreement.
“Even though inventories have started to fall, they remain at elevated levels… Stocks have settled into the 62-65 days consumption or approximately 2.98 billion barrels,” ANZ bank said in a note into OPEC’s cuts on Friday.
This compares with the five-year average of 55 days’ worth of consumption that Saudi Arabia wants to achieve.
In order to achieve this, ANZ said it expected OPEC to extend its cuts beyond the first half of 2017, although it added that “there is some risk that non-OPEC producers (such as Russia) may baulk at the suggestion.”
The ongoing supply overhang is in large part due to a relentless rise in U.S. production, which has risen by 10 percent since mid-2016 to 9.27 million bpd.
And analysts expect U.S. production to keep rising this year.
Consultancy Rystad Energy expects U.S. shale oil output to grow by 100,000 bpd each month for the rest of this year and into 2018, well above estimates by the U.S. Energy Information Administration for monthly gains of about 29,000 bpd in 2017 and 57,000 bpd in 2018.
Outside the United States, rising output in Libya, an OPEC-member exempt from the cuts, was adding to plentiful supplies.
(Reporting by Henning Gloystein; Editing by Richard Pullin and Sherry Jacob-Phillips)