By May 26, 2017 Read More →

Oil prices pare losses, but end week lower on OPEC cuts disappointment

Oil prices

Oil prices rose slightly on Friday.  Industry is hoping the summer driving season which kicks off this Memorial Day long weekend will be strong this year.  Phillips 66 photo.

Oil prices up over 1 per cent Friday

Oil prices rose over 1 per cent on Friday, but Brent crude ended the week down almost 3 per cent lower after investors were disappointed the OPEC supply cut reduction did not cut deeper.

Trading was light on Friday after the Thursday sell-off and ahead of long weekends in the United States and Britain.

Brent futures rose 69 cents to $52.15/barrel and US WTI crude futures settled at $49.80/barrel, up 90 cents.

On Thursday, OPEC along with non-cartel members announced they would extend the production cuts of 1.8 million barrels per day (b/d) to March 2018.

Following the announcement, crude prices fell 5 per cent.

“I think it was kind of a knee jerk reaction, I don’t think it was anything meaningful,” Antoine Halff, Director of the Global Oil Program at Columbia University told Reuters.

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Data from the Commodity Futures Trading Commission showed that one week prior to the OPEC meeting, hedge funds raised bullish bets on US crude for the first time in five weeks. A majority of the increase came from the liquidation of gross short positions.

Brent volumes were down for the week by 2.7 per cent and WTI declined 1.1 per cent.

Producers are confident the OPEC supply cuts will reduce the global crude oversupply, and will bring down crude stocks to their five-year average of 2.7 billion barrels.

But, US production continues to rise, and is up 10 per cent since mid-2016 to over 9.3 million b/d.

Baker Hughes reported US energy firms added rigs for a 19th straight week, but the pace of additions has slowed with only two more rigs this week.  The monthly total added was the lowest since October.

Trader, including Goldman Sachs, are concerned that rising US production and the end of the OPEC production reduction deal could mean another price slump.

Many are looking to the gasoline market to strengthen as the summer driving season begins this Memorial Day weekend.  The number of drivers expected to be on the road is forecast to hit a 12-year high, driven by a growing economy and relatively cheap fuel.

“Hopefully driving season picks up,” James Williams, president of energy consultant WTRG Economics in London, Arkansas told Reuters. “Hopefully the market is saved by the U.S. driver this Memorial weekend.”


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