Oil prices “hardly likely to make any lasting recovery”: Commerzbank
Oil prices ended slightly down on Thursday after hitting one-month lows earlier in the session. Prices fell 5 per cent on Wednesday after the US Energy Information Administration reported a surprise increase in US crude stocks and the return of Nigerian crude.
Data from the EIA showed a slight slowdown in US crude production last week, falling to 9.318 million barrels per day (b/d), the first drop in four weeks.
Brent crude settled down 20 cents to $47.87/barrel, after dropping to a low of $47.76 earlier in the day. US crude futures were down 8 cents to $45.64/barrel.
“The market is catching its breath after the inventory report which, as far as the oil market was concerned, stunk,” Andrew Lipow, president of Lipow Oil Associates told Reuters.
“The market continues to be impatient with the OPEC and non OPEC cuts and is looking for more data world wide that inventories are indeed falling.”
OPEC along with some non-cartel members agreed to extend their supply cut agreement into the first quarter of 2018, but that move has so far not resulted in a price increase.
Oil prices have fallen below $50/barrel despite OPEC’s supply cut agreement, which reduces participants’ production by 1.8 million barrels per day (b/d).
In recent days, the market has come under increasing pressure due to rising output in Libya. On Wednesday, Royal Dutch Shell announced it lifted a force majeure on exports of Nigeria’s Forcados crude. This brings the African nation’s crude grades fully online for the first time in 16 months.
“I’ve been quite bullish for the second half of this year, based on supply and demand balances and I would still not give up on that idea, that rebalancing is going to start in the second half,” PVM Oil Associates strategist Tamas Varga told Reuters.
“But if Nigerian and Libyan production is picking up as well as they are now, then slowly, I am probably going to have to start changing my mind.”
The market was relatively quiet on Thursday as traders were distracted by the testimony of former FBI Director James Comey before a US Senate committee on Russian interference in the recent US election.
“Today the prices are more quiet and a lot of people are focused on a lot of other things that probably won’t drive these prices,” Rob Haworth, senior investment strategist at U.S. Bank Wealth Management told Reuters.
WTI trading volumes on Thursday were down about 84 per cent from the same time on Wednesday.
According to Reuters, the most actively traded Brent derivatives were bearish sell options giving the holder the right to sell at $45 and $46 a barrel between August and December.
Responding to the surprise increase in US crude stocks, Commerzbank said in a statement “Unless data are released that make the latest inventory build appear an anomaly, oil prices are hardly likely to make any lasting recovery.”
