Crude futures were quiet on Friday as the market is set to close out another downbeat week amid continued worries about how quickly global inventories might get pared.
Oil fell upwards of 5% each of the past two weeks, and futures have dropped a further 3% so far this week, hitting seven-month lows. More declines could be in the offing depending on weekly U.S. drilling-rig data due later Friday from Baker Hughes. The active oil-rig count has risen for 21-straight week, according to the company.
Increased U.S. oil production this year has been helping hamper efforts led by the Organization of the Petroleum Exporting Countries to get global inventories back to their 5-year average. Production cuts, which started in January, haven’t yet resulted in much progress on that effort, resulting in the output caps being extended until March. But some analysts have said that even then, supplies may still be above OPEC’s goal.
Earlier this week, the International Energy Agency offered a grim forecast that a gusher of new supplies from the U.S. stands to keep the market well-flushed for some time.
The U.S. Energy Department echoed that sentiment on Thursday, saying that some inventory declines through summer may nudge prices higher the next few months, possibly resulting in even-higher domestic output in 2018 than currently anticipated.
Light, sweet crude futures traded on the New York Mercantile Exchange for delivery in July
was recently up 3 cents at $44.49 a barrel and August Brent
on London’s ICE Futures exchange was up 5 cents at $46.97.
This year’s rebound in U.S. oil production and 17% drop in prices have drawn harsh criticisms about OPEC’s wisdom in implementing the output cuts at the first place. “By setting impossible objects, by promising unreachable targets, OPEC ministers only managed to further motivate U.S. producers,” said Mohab Kamel, a trader at Geneva-based Magma Oil.
Also keeping global supplies flush have been stronger-than-expected production rebounds in Nigeria and Libya, two OPEC nations exempt from cutting their output. Their increases have effectively halved the OPEC cuts, said London-based consultancy Energy Aspects, which this week lowered its third-quarter Brent price forecast by $8 to $53.
Ultimately, where oil heads could be up to Saudi Arabia. If it “truly lives up to its words of ‘do whatever it takes,’ then now is the time — and it will take further production cuts to erase the backlog,” said Stuart Ive, a client manager at OM Financial.
Nymex reformulated gasoline blendstock for July
was recently up 0.6% at $1.4436 a gallon, diesel rose 0.2% to $1.4171 and ICE gasoil gained 0.2% to $422 a metric ton.