Oil prices edge up to two-week high on dip in US output
NEW YORK (Reuters) — Oil futures edged up less than 1% after hitting a two-week high on Thursday, extending a rally into a sixth straight session after a decline in weekly US crude production temporarily alleviated concerns about deepening oversupply.
Crude prices slipped to the lowest in 10 mos. last week but have since rebounded more than 7%, stretching their bull run to the longest since April.
It is unclear, however, whether the bearish sentiment has abated in the oil market, given larger-than-usual inventories in the United States for both crude oil and key products like gasoline.
In recent weeks, funds have been unloading long speculative positions, reducing bets on higher prices while brokerages including Goldman Sachs and Barclays have cut their forecasts for crude prices for 2017. Goldman, on Wednesday, cut its forecast for US crude for the next three months to $47.50/bbl from $55.
"After the steep drop in oil prices of recent weeks, I believe that especially hedge funds saw nice buying momentum and lower US crude production was the trigger to act," said Hans van Cleef, senior energy economist at ABN Amro.
US crude production dropped 100,000 bpd to 9.3 MMbpd last week, the steepest weekly fall since July 2016. But analysts and traders said the decline was related to temporary factors, including production shut as a precaution in the Gulf of Mexico due to Tropical Storm Cindy, along with maintenance in Alaska.
Brent crude futures were 30 cents, or 0.6%, higher at $47.61/bbl by 11:38 a.m. EDT (1538 GMT), having touched a two-week high of $48.03 earlier in the session.
US crude also hit a two-week peak at $45.45 and was last up 35 cents, or 0.7%, at $45.09/bbl.
Global oil supplies remain ample despite output cuts by the Organization of the Petroleum Exporting Countries and other producers of 1.8 MMbpd since January.
OPEC and its allies, trying to reduce a crude glut, agreed in May to extend the supply cut through March 2018. OPEC has exempted Nigeria and Libya from the curbs, leaving them free to ramp up output that had been sapped by local unrest.
"That's going to increase pressure on OPEC cuts," said Tony Scott, managing director of analytics at BTU Analytics in Denver. "As long as Libya and Nigeria can remain stable—Libya has ramped up several times over last couple of years and then the violence has come back."
Libyan oil production is now nearing 1 MMbpd, a Libyan source with direct knowledge of the matter told Reuters.
Royal Dutch Shell on Wednesday lifted force majeure on Nigerian Bonny Light crude exports after pipeline repairs.
Analysts at investment bank Goldman Sachs said rising Nigerian and Libyan output, as well as increasing US shale oil drilling, would slow the drawdown in crude inventories.
Reporting by David Gaffen; Additional reporting by Karolin Schaps in London and Naveen Thukral in Singapore; Editing by Marguerita Choy and Edmund Blair
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