New York, US | – Oil headed for a third weekly drop as rising supplies from the U.S. and Nigeria showed that OPEC is still struggling to clear a global oil surplus.
Futures were little changed in New York Friday, returning to the sub-$50 levels traded when OPEC first agreed to output curbs in November. U.S data released Wednesday showed total crude and product stockpiles rose by the most since 2008 last week, surprising a market that had been expecting further declines. American output is also seen surging in 2018 to a record above 10 MMbpd. In Nigeria, Royal Dutch Shell Plc lifted restrictions on exports of a key grade halted for more than a year.
Oil has largely given up its gains after the Organization of Petroleum Exporting Countries and its allies including Russia agreed late last year to curb output. A persistent glut amid a ramp-up in U.S. production this year has kept prices under pressure. Even this week, the oversupply has kept oil in check amid turmoil in the Middle East, the world’s largest producing region, as a Saudi Arabia-Qatar diplomatic feud flared and suicide bombers struck Iran’s capital Tehran.
“We’ve gone down pretty much since the OPEC extension. That was kind of the game-changer,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone. “This has been the most vicious battle between the bulls and the bears. Obviously, the inventory draws haven’t happened as quickly” as the bulls would like.
West Texas Intermediate for July delivery fell 1 cent to $45.63/bbl at 10:23 a.m. on the New York Mercantile Exchange. Futures are heading toward a weekly decline of more than 4%. Total volume traded was about 13% above the 100-day average. Prices lost 8 cents to close at $45.64 on Thursday, the lowest since May 4.
Brent for August settlement dropped 2 cents to $47.84/bbl on the London-based ICE Futures Europe exchange. Prices are down 4.2% so far this week. The global benchmark crude traded at a premium of $1.97 to WTI for August.
Libya resumed production at the Sharara oil field, the nation’s biggest, and output will reach normal levels within three days, National Oil Co. said on its website. It closed Wednesday after a protest by workers, according to a person with direct knowledge of the matter.
“The short-term outlook is not much brighter for oil,” said Jens Naervig Pedersen, a senior analyst at Danske Bank A/S in Copenhagen. “Crude stocks are done adjusting lower, demand looks weak, the market is ignoring geopolitical tensions in the Middle East. Fundamentally we are approaching a natural floor for prices though, where shale producers will have to start scaling back on plans to raise output further.”