Hefty Stocks Keep Oil Price Near April Low
25 April 2017 - 11:52AM
Dow Jones News
By Sarah McFarlane and Jenny W. Hsu
Oil prices were slightly higher on Tuesday, but hovered just
above their lowest level this month amid continued doubts that the
global crude glut is being drained.
Crude is down around 5% on the week. That reflects recent
investor concern about the strength of rebounding U.S. oil
production and ebbing faith that the Organization of the Petroleum
Exporting Countries can effectively lead the market back into
balance after several years of oversupply.
Brent crude, the global oil benchmark, rose 0.12% to $51.66 a
barrel on London's ICE Futures exchange, having dipped to $51.42 on
Monday, their lowest level this month. On the New York Mercantile
Exchange, West Texas Intermediate futures were trading up 0.14% at
$49.30 a barrel.
"The market is really focusing on visible inventory draws,
they're just not getting it in the right places," said Miswin
Mahesh, oil analyst at consultancy Energy Aspects.
Mr. Mahesh said that although stocks of refined products were
falling, investors wanted to see crude stocks fall.
"Volumes released from storage, while hard to quantify, are
large enough to be of significance for the wider market and will
act as a buffer which will need to be cleared before the underlying
tightening in supply-demand balances can become the market driver
again," said consultancy JBC Energy in a note.
OPEC and other major producers agreed to cut production by 1.8
million barrels a day in the first half of 2017, but because stocks
have remained high the cartel is now expected to extend the deal
when it meets in May.
"Until OPEC announces an official decision on whether to extend
the production cuts, the main focus of the market will be on that,"
said Nelson Wang, an energy analyst at CLSA.
Analysts believe that failure by OPEC and major producers such
as Russia to deliver an extension could result in a steep price
decline.
Analysts say the recent downtrend may persist as U.S.
oilfield-service companies, namely drillers, still have plenty of
spare capacity.
Mr. Wang estimates only around 70% of available oil rigs in the
U.S. are currently in operation despite persistent growth this year
in drilling activity there. Baker Hughes' closely watched rig count
is at its highest level in nearly two years.
"This means there is a lot of upside risk to U.S. supplies," he
said.
Nymex reformulated gasoline blendstock--the benchmark gasoline
contract--fell 0.4% to $1.63 a gallon. ICE gasoil changed hands at
$467.75 a metric ton, up $2.00 from the previous settlement.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Jenny W.
Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
April 25, 2017 06:37 ET (10:37 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.