Oil prices edge up on Friday, but supply glut concerns market

Oil prices up slightly from 2017 lows

On Friday, oil prices rose slightly after some producers said they were cutting back on exports, despite the uptick, the market fell for a fourth straight week of losses as investors could not shake concerns about the global glut of crude.

Oil prices hit six-month lows on Thursday and have fallen over 12 per cent since late May after OPEC announced it was extending the supply cut agreement for another nine months.

Brent crude futures settled up 45 cents to $47.37/barrel and US WTI was up 28 cents to $44.74/barrel.

“It’s going to be difficult to have a rally unless there’s a disruption or some news from OPEC,” said Olivier Jakob, managing director with PetroMatrix.

Reuters reports Russia is expected to export 61.2 million tonnes, or about 5 million barrels per day (b/d) of crude in the third quarter.  In 2017 Q2, Russia exported 60.5 million tonnes, according to Reuters sources and calculations.

Kazakhstan, a non-OPEC member participating in the OPEC pact, said it would reduce production in June and July after overproducing for three straight months.

After years of unrest, OPEC members Nigeria and Libya were exempted from the OPEC deal.  Recently the two countries have revived their oil industries and boosted their exports after withstanding supply disruptions caused by protests, rebel activity and mismanagement.

US crude production grew over 1o per cent in the past year, and the increase has also undermined OPEC-led cuts.  Earlier in the week, the US Energy Information Administration data showed growing gasoline stocks and weak demand, despite the peak summer driving season.

Another sign of the oversupply is ageing supertankers being used to store unsold crude off Singapore and Malaysia.

Donate now! Please support quality journalism by contributing to our Patreon campaign. Even $5 a month helps us continue delivering high quality news and analysis about Canadian and American energy stories that affect your life and your lifestyle.

On Friday, Baker Hughes reported the US rig count has risen for the 22nd straight week, increasing by six to 747.  The rig count now stands at the highest since April 10, 2015.

The pace of additions in the US rig count has slowed and lower oil prices are sure to test US shale drillers.

According to Reuters, eight prominent hedge funds reduced the size of their positions in ten of the top Permian shale firms by over $400 million, due to concerns that producers pumping so fast are likely to undo the nascent recovery in the industry.