Oil Swings Between Gains and Losses
March 24 2017 - 12:05PM
Dow Jones News
By Sarah McFarlane, Alison Sider and Jenny W. Hsu
Global crude futures wavered between slight gains and losses
Friday, amid growing concerns that OPEC's pledge to reduce global
inventories was encouraging the U.S. to boost production.
U.S. crude futures pared gains in earlier trading and were
recently up 3 cents, or 0.06%, at $47.73 a barrel on the New York
Mercantile Exchange. Brent, the global benchmark, was unchanged at
$50.56 a barrel on ICE Futures Europe.
Prices have been largely treading water, hovering above a
four-month low, ahead of a meeting of the committee charged with
overseeing the implementation of the production-cut agreement
struck late last year by the Organization of the Petroleum
Exporting Countries and other nations.
The oil cartel and a group of non-OPEC heavyweights have agreed
to cut output by 1.8 million barrels a day, but market participants
are becoming increasingly anxious that the cuts haven't been enough
to drain the global oil glut. Analysts and investors are watching
for signs that the group will extend production cuts set to expire
at the end of June.
"There's a lot of uncertainty about whether the cut is going to
be in place long enough to alter the fundamental picture," said
Gene McGillian, research manager for Tradition Energy. "People are
waiting to see if anything comes out of the meeting -- if nothing
comes out that can be viewed as substantial, we can expect further
liquidation."
Crude prices have fallen by around nearly 12% since the
beginning of March as analysts say rising production and growing
stockpiles in the U.S. are foiling OPEC's efforts.
"Stocks do seem to be growing at least in the U.S. and a couple
of the other OECD regions, rig counts are increasing, U.S.
production is increasing, investors seem to have lost some
confidence," said Tom Pugh, a commodities analyst at Capital
Economics.
U.S. shale-oil production has climbed nearly 5% since the first
week of December, data from the U.S. Energy Information
Administration showed, and total output has stayed above the
9-million-barrel-a-day threshold for the past four weeks. Meanwhile
U.S. crude stocks rose more sharply than expected to a fresh high
in the week ended March 17.
"[The] U.S. is acting as a bellwether for the global stock
overhang. With little sign of an imminent rebalancing in U.S. crude
inventories, the near-term risks for oil prices remain skewed to
the downside," said brokerage PVM.
That will put more pressure on the monitoring committee
overseeing compliance with the production-cut agreement as it meets
this weekend.
"I think that they know they are going to be under pressure,
prices aren't much higher than when the first deal was struck, and
stocks are not much lower, so for every reason that you had to do
the original deal, all those reasons are still valid," said Mr.
Pugh.
"The sticking point is going to be Iran, Saudi will want them to
join in any cuts, I think that will probably result in a compromise
where Iran agrees to freeze its production at current levels."
The original deal among OPEC members agreed on Nov. 30 allowed
Iran a limited output increase.
Saudi Arabia, which is shouldering the bulk of the cuts, will
likely lobby to extend the plan, especially after ratings company
Fitch cut the kingdom's credit rating to A+ from AA- and lowered
the outlook to negative from stable, citing a worsening government
deficit caused by declining oil prices, said Stuart Ive, a client
manager at OM Financial.
"OPEC is feeling the pressure. It may pay to go into the weekend
long with a tight stop or look at optionality to reflect a spike
come Monday, " he said.
Market players will also be watching the weekly U.S. rig count
before placing bets. In the week ended March 17, U.S. drillers
activated 14 more rigs, the ninth straight week of additions.
Gasoline futures were recently down 0.47 cent, or 0.3%, at
$1.5849 a gallon. Diesel futures were down 0.15 cent, or 0.1%, at
$1.4886 a gallon.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com, Alison
Sider at alison.sider@wsj.com and Jenny W. Hsu at
jenny.hsu@wsj.com
(END) Dow Jones Newswires
March 24, 2017 11:50 ET (15:50 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.