Oil prices down by pennies, Brent crude nears $50/barrel

Brent oil prices fell slightly on Tuesday, but tentative signs show that US production may be slowing. Apache photo.

Oil prices rise on signs US production may be slowing

Oil prices rose slightly in trading on Tuesday as the market reacted to tentative signs that the recent steady rise in US crude production may be slowing.

Brent settled down 7 cents to $49.61 and US WTI crude futures were trading up 1 cent to $47.08/barrel.

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According to Reuters, earlier in the session both Brent and WTI traded lower as many traders closed positions ahead of the July 4th holiday, while Brent also faced technical resistance as it neared $50.

Some analysts say the market’s outlook has shifted somewhat.

In the past two months, the mood was bearish as US output continued to increase and doubts about OPEC’s ability to tighten the market grew.

But, towards the end of June when data showed a dip in US crude output and a slight fall in drilling for new production, the mood began to change.

“The fact that prices have not come under any noticeable pressure of late points to a shift in sentiment,” Commerzbank said on Tuesday.

“This may be related to the fact that most of the ‘shaky hands’ have withdrawn from the market by now,” the bank added.

Oil prices have risen recently despite an increase in OPEC production.  The cartel hit a 2017 high of 32.72 million barrels per day (b/d) in June, according to a Reuters survey.

Rising production from Libya and Nigeria has hampered OPEC’s efforts to rebalance the market.  The two cartel countries were exempted from the OPEC supply cut agreement after years of unrest severely stymied their oil industries.

Libya is now pumping about 1 million b/d of oil, a four-year high.

Along with increased production, OPEC exports also rose for a second straight month to 25.92 million b/d, up from 1.9 million b/d in the same month last year, according to Thomson Reuters Oil Research.

“We see a recovery for oil prices in H2 2017 from current levels, with OPEC production cuts, a slowdown in global supply growth and seasonally firming demand driving up prices,” BMI Research said, although it added that “large-volume supply additions will keep price growth flat year on year in 2018”.