Oil firm as signs of higher demand outweigh worries of excess
LONDON (Reuters) — Oil prices edged higher on Friday and were on track for solid weekly gains following positive demand signals, production issues in Nigeria and a reported decline in stocks.
Brent crude futures, the international benchmark for oil, were up 43 cents at $48.85/bbl at 11:11 GMT.
US West Texas Intermediate (WTI) crude futures were at $46.45/bbl, up 37 cents.
Shell declared force majeure on exports of Nigeria's Bonny Light crude oil due to the closure of one of its two export pipelines, boosting both benchmarks.
The contracts had already been trading some 5% above the week's lows, boosted by a report from the International Energy Agency (IEA) that demand growth is accelerating, from China that crude imports grew significantly and from the US Energy Information Administration (EIA) that oil stocks had fallen.
"Those who wanted confirmation about global oil demand had it" in Chinese import figures, said Tamas Varga, an analyst with PVM Oil Associates. He added surging stock markets had added a "feel-good factor" to oil.
China's crude oil imports over the first six months of 2017, hit 212 MMt, up 13.8% on the same period in 2016, customs data showed.
This added to an IEA report raising its demand estimate. Analysts at Commerzbank said the subsequent reduction in the developed world's oil stocks was likely to continue "so long OPEC does not significantly increase its output any further".
Asian traders are selling oil products out of tanks amid soaring demand, while the EIA reported the largest drop in US crude oil inventories in the week to last week in 10 months.
Still, oil stocks remained comfortably above the five-year average, and prices are more than 16% below their 2017 highs, despite an extension to March 2018 of output cuts of 1.8 MMbpd coordinated by the Organization of the Petroleum Exporting Countries.
OPEC's rebalancing effort has been stymied in part by rising output from Libya and Nigeria, which were exempt from cuts and were producing close to 700,000 bpd more than at the time of the initial November OPEC cut agreement, according to US investment bank Jefferies. Despite force majeure, Bonny Light exports continued via a second pipeline.
US oil production has also risen by more than 10% over the past year to 9.4 MMbpd.
"It's not too long before the market starts looking at the supply situation...which is anything but encouraging," Varga said.
Reporting by Libby George; Additional reporting by Henning Gloystein and Aaron Sheldrick in Singapore, editing by David Evans and Jason Neely
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