Oil Prices Pause in Asian Trading
27 July 2017 - 4:53AM
Dow Jones News
By Jenny W. Hsu and Alison Sider
Oil futures edged lower in Asian trading Thursday after fresh
gains in the U.S. amid bullish weekly data on both supplies and
production.
The Energy Information Administration said U.S. crude stockpiles
fell a bigger-than-expected 7.2 million barrels last week, the
fourth-straight drop. Supplies of gasoline and distillates also
fell while output abated slightly.
All this points to strong demand growth as refineries are eager
to capture still-healthy margins, said analysts.
"Is it possible we've maxed out? There is that possibility,"
said Bob Yawger, director of the futures division at Mizuho
Securities USA, joining a growing group of analysts who believe
there is not much room left for U.S. production to grow for now
because of the oil-patch capital-spending slump seen in 2015 and
2016 as prices crashed.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in September recently traded down 0.1% at $48.69 a
barrel in the Globex electronic session. September Brent crude on
London's ICE Futures exchange eased 0.2% to $50.89.
Through Wednesday's settlement, oil prices jumped more than 6%
this week as investors have started to come around to the idea that
output-curtailment efforts by the Organization of the Petroleum
Exporting Countries and other major producers may be starting to
show results. That as recent data have shown increasing levels of
long positions amid oil speculators.
As the U.S. shale boom of the past several years resulted in
sharp oil-output growth from America, those in the Middle East and
Russia boosted their own production to defend their market share.
That ultimately resulted in oil hitting its worst levels since the
mid-2000s at the start of 2016.
But the tide is slowly turning, say some, contending that
prolonged low prices may have started to weed out high-cost
producers and investors in the U.S.
At the same time, OPEC's production-curtailment initiative is
also seeing gradual signs of success. That as Saudi Arabia
announced Monday it will decrease August exports, a moved emulated
by Kuwait.
Meanwhile, global oil demand is rising on a steady pace, mostly
due to the ferocious appetite in China, India and other emerging
countries in Asia.
Still, traders are still treading lightly and mindful that last
week's hefty inventory decline may not be sustainable.
Crude demand by U.S. refiners will likely recede in September
and October when seasonal maintenance work begins, Societe Generale
noted. Meanwhile, long-term Chinese oil demand is expected to lose
some steam as the country veers towards green energy and natural
gas to power its massive population, said BMI Research.
Among products, Nymex September diesel rose 0.2% to $1.6023 a
gallon, reformulated gasoline blendstock was flat at $1.5940 and
August ICE gasoil rose 0.8% to $474 per metric ton.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
July 26, 2017 23:38 ET (03:38 GMT)
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