By July 28, 2017 Read More →

Oil prices rise, on on signs of easing oversupply

Oil prices

Oil prices rose on Friday and are on track for their biggest weekly gain this year.  Chevron photo.

Oil prices on track for biggest weekly gain this year

Oil prices hit two-month highs on Friday and are on track to post the strongest weekly percentage gain in 2017 as investors’ concerns about the stubborn global oversupply eased.

Brent crude futures were up 86 cents to $52.35/barrel at 11:35 a.m. EDT, slightly down from the two-month high of $52.68 reached earlier in the session.

US WTI crude futures wre up 57 cents to $49.61/barrel, down from the earlier high of $49.78/barrel.

With an increase of over 8 per cent, both Brent and WTI are on track to post their largest weekly percentage gains in 2017.

Physical oil markets have tightened due to strong refining margins as US refiners push to meet higher demand from some Latin American countries dealing with local refinery problems.

“Both markets are seeing a strong move in spreads through most of 2017 and 2018 due to shorts covering into heavy producer flow,” Scott Shelton, broker at ICAP in Durham, North Carolina told Reuters.

“Overall, I think the bullish demand story is taking the headlines away from the supply story as products are strong globally when refinery runs are maxed and that implies that current demand expectations could be significantly below reality.”

On Wednesday, the United States Energy Information Administration reported US crude and gasoline stocks dropped much more than analysts had anticipated.  As well, Saudi Arabia announced earlier this week that it will reduce its exports in August by about 1 million barrels per day (b/d).

On Friday, Shell reported it will extend its force majeure on exports of Nigeria’s Bonny Light crude due to an outage of the Trans Niger Pipeline.

Despite the gains, some analysts still hold bearish positions on the oil market.

Reuters reports Commerzbank analysts said “We believe the latest price rise is on a fragile footing.”  They added that OPEC production was likely to rise in the coming months as the group has not officially capped output from members Libya and Nigeria.

On Friday, data from Baker Hughes showed the US oil rig count rose by two and the natural gas rig count was up by six.  In Canada, the oil rig count rose by 11 and there were three more natural gas rigs compared to last week.


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