LONDON, HONG KONG: After a rally in the first half of April, oil is set to end the month back below $50 a barrel.
Futures are down 2.4 per cent this month in New York after slipping 6.3 per cent in March. What’s worrying investors is expanding US crude production, which threatens to dilute the impact of Opec-led supply cuts. While Russia says it has fully implemented its pledged 300,000 barrel-a-day output reduction, analysts are still debating whether the Kremlin would be willing to join Opec in extending the agreement for another six months.
American production has expanded to the highest since August 2015 and Saudi Arabia’s Energy Minister Khalid Al Falih has acknowledged that the first quarter of curbs failed to bring stockpiles below the five-year average. While the Organisation of Petroleum Exporting Countries and its allies mull extending the deal past June, US drillers targeting crude have added rigs, taking the count to a two-year high.
“It’s been a troubled month for oil as the tug-of-war between Opec’s cutting efforts and rising US production continues,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “We maintain the view that the oil market remains rangebound for now. US production growth slowing can push oil higher while the downside risk could be a slowdown in demand growth.”
West Texas Intermediate for June delivery rose as much as 1.4 per cent on Friday from the lowest level in a month. It was up 39 cents at $49.36 a barrel on the New York Mercantile Exchange at 9.31am in London. Total volume traded was about 8 per cent above the 100-day average. Prices lost 1.3 per cent to $48.97 on Thursday, snapping a two-day gain.
Opec compliance
Brent for June settlement, which expires Friday, was 33 cents higher at $51.77 a barrel on the London-based ICE Futures Europe exchange. Prices are down 2 per cent this month. The global benchmark crude traded at a premium of $2.38 to WTI. The more-active July contract rose 43 cents to $52.25.
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Opec’s supply cuts have had some success as US inventories have fallen for the past three weeks. Global stockpiles increased by less than average during the first quarter and producers’ compliance with the agreed supply cuts was at 98 per cent in March, Opec Secretary-General Mohammad Barkindo said in Paris Thursday.
Libya’s plans to restart two of its largest oilfields overshadowed Barkindo’s optimism. The nation’s National Oil Co. confirmed shipments would resume at the Zawiya oil port after a “substantial improvement in the security situation,” according to an emailed statement.
