Oil moves cautiously higher, remains under $50-a-barrel
Oil prices looked set to stabilize on Friday, but remained below a key support level as investors remained wary over rising U.S. crude oil inventories.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in AprilCLJ7, +0.79% traded at $49.65 a barrel, up 36 cents, or 0.8% in the Globex electronic session. On Thursday, U.S. crude prices fell below $50 a barrel for the first time this year.
May Brent crude LCOK7, +0.71% on London’s ICE Futures exchange rose 36 cents, or 0.7%, to $52.55 a barrel.
The sharp selloff in the previous session came as traders, who in recent weeks had posted a record number of bets that oil prices would move higher, were caught on the wrong foot by the surprise increase in U.S. stockpiles.
The U.S. Energy Information Administration on Wednesday reported an 8.2-million-barrel increase in domestic crude supplies, the ninth consecutive weekly climb, lifting total commercial inventories to a record weekly level of 528.4 million barrels. Analysts surveyed by The Wall Street Journal had forecast an inventory increase of 1.7 million barrels.
In addition to rising stockpiles, U.S. crude production last week reached a more than one-year high. U.S. oil producers have lifted output on the back of stronger oil prices following the decision by OPEC and other producers to cut output.
“If oil prices remain below $50, even U.S. producers will find it difficult to raise production,” said Li Li, an analyst with ICIS China, adding that she expected prices to rebound soon from current levels.
“The market sold off because investors probably got impatient. The current situation is temporary and supply and demand will rebalance eventually,” she said, adding that lack of clarity in terms of real data about the global market situation had also contributed to the panic sell off.
Most analysts are optimistic that members of the Organization of the Petroleum Exporting Countries will not only implement planned output cuts, but extend them further to boost oil prices. Energy ministers from several major oil-producing countries recently reiterated their commitment to the planned output cuts, while Russia has also promised to follow through on a similar pledge.
“Should data continue to confirm that the OPEC-Russia deal is holding, we expect a gradual uptrend this year, although if inventories remain elevated a rally will be less likely,” a NAB Group Economics report said.
Meanwhile, oil product futures were up.
Nymex reformulated gasoline blendstock for April RBK7, +0.38% — the benchmark gasoline contract — rose 33 points to $1.6276 a gallon.
ICE gasoil for March changed hands at $465 a metric ton, up $5.50 from Thursday’s settlement.
Source: MarketWatch
