Oil Retreats on OPEC Doubts
July 21 2017 - 4:43PM
Dow Jones News
By Timothy Puko
Oil's rally fell flat with a late-week selloff canceling out
early-week gains after new questions emerged about OPEC's ability
to hold to its promise of output cuts.
Light, sweet crude for September delivery settled down $1.15, or
2.5%, at $45.77 a barrel on the New York Mercantile Exchange. Brent
crude, the global benchmark, lost $1.24, or 2.5%, to $48.06 a
barrel on ICE Futures Europe. Both had their seventh-lowest
settlement of the year.
Both also lost ground for the seventh time in the last nine
weeks. U.S. oil fell 98 cents, or 2.1% a barrel this week. Brent
lost 85 cents, or 1.7%.
Prices turned south Friday in early-morning trading after
further confirmation of rising supply from the Organization of the
Petroleum Exporting Countries, brokers said. OPEC output rose above
33 million barrels a day in this month, up 145,000 barrels a day
from a month ago, tanker tracking firm Petro-Logistics said.
"We're getting back to this idea that the market may not
rebalance as thought," said Bart Melek, head of commodity strategy
at TD Securities in Toronto.
The data aren't far from what has already been reported. The
International Energy Agency said last week that OPEC crude output
was rising to its highest level in 2017 at 32.6 million barrels a
day, driven by Libya, Nigeria and Saudi Arabia.
But any prospect for more OPEC supply increases can shake a
market in which a rally was already looking fragile, brokers and
analysts said. That rally includes U.S. oil's longest winning
streak in seven years, but has stalled late this week as it bumped
up against six-week highs, a signal to some momentum-based traders
that oil's next move is a retreat.
OPEC has tried to ease a longstanding glut and boost prices with
a pact to cut output this year, but it hasn't pushed futures to the
$60 mark that many expected. Now traders are becoming leery again
of rising production from several sources globally, including
countries that were supposed to be part of OPEC's output cuts.
"The silent fear now is that the OPEC deal could really start to
unravel, " said Bill Baruch, chief market strategist at Chicago
brokerage iiTrader.
OPEC officials are about to start meetings in Russia this
weekend with counterparts from non-OPEC countries that have
participated in this year's output cuts. Delegates are supposed to
discuss the possibility of including two previously exempted OPEC
members, Nigeria and Libya, into the deal. But traders are becoming
skeptical that meetings will produce any significant changes.
"I don't think they're going to agree to a damn thing. They're
trying to get their output higher," Tariq Zahir, managing member of
Tyche Capital Advisors LLC, said about Libya and Nigeria. "You
really have to get some proof supply is coming off the market" for
the rally to keep going.
Gasoline futures lost 4.29 cents, or 2.7%, to $1.5633 a gallon.
They gained 0.28 cents, or 0.2%, for the week.
Diesel futures lost 2.84 cents, or 1.8%, to $1.5152 a gallon.
They gained 0.02 cent, or 0.01%, for the week.
--Sarah McFarlane contributed to this article.
Write to Timothy Puko at tim.puko@wsj.com
(END) Dow Jones Newswires
July 21, 2017 16:28 ET (20:28 GMT)
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