Oil prices up Friday, but post weekly declines
Oil prices rose slightly in Friday trading after a Nigerian oil pipeline was shut down after rebels drilled a hole into the line. Despite the bump on Friday, crude ended the week down nearly 4 per cent on concerns of the global oversupply.
Brent crude settled up by 29 cents to $48.15/barrel and US crude future rose 19 cents to $45.83/barrel.
Both benchmarks posted weekly declines of nearly 4 per cent as investors were pressured by high US inventories and production as well as heavy worldwide crude supplies.
“I don’t think it’s anything more than a temporary stabilization,” Gene McGillian, manager of market research at Tradition Energy told Reuters. McGillian added that traders were short-covering ahead of the weekend.
“The increases in production will still drag us lower,” he said.
According to Reuters, the Shell Development Company of Nigeria declared a force majeure on Nigerian Bonny light crude after a hole drilled into the Trans Niger Pipeline caused a leak.
Carsten Fritsch, senior commodity analyst at Commerzbank told Reuters that the leak shows “the production trend in Nigeria is far from stable.”
OPEC members Nigeria and Libya have been exempted from the cartel’s supply cut pact due to unrest in the two countries that has significantly cut into their production.
But in recent weeks, both African countries had boosted their output.
The 270,000 barrels per day (b/d) Sharara oilfield in Libya reopened after workers’ protests and will likely return to normal production within three days, according to the National Oil Corp on Friday.
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Baker Hughes reported on Friday that US production is also on the rise as drillers added eight rigs in the week ending June 9. The total US rig count is now 741, the highest since April, 2015.
Mid-week, the US Energy Information Administration data showed a surprise increase in US crude stocks by 3.3 million barrels, bringing the total count to 513.2 million barrels. The EIA also reported an increase in refined products, despite the beginning of peak-demand summer season.
“The drop (in gasoline demand) a week after Memorial Day demoralized the market,” said McGillian.
Americans have driven less than expected compared to this time last year and US refined product inventories are now above 2016 levels and well above their five-year range.
Adding to investors’ concerns is an oversupplied Asian market. Currently, traders are putting excess crude into floating storage.
Thomson Reuters shipping data show that at least 25 supertankers are sitting in the Strait of Malacca and the Singapore Strait, holding unsold fuel.
