Sun, Aug 13, 2017 - Page 14 News List

Oil caps weekly drop amid shaky compliance

Bloomberg

Oil had its worst week in a month as compliance with OPEC’s deal faltered and the outlook for demand worsened.

While a weaker US dollar helped push prices in New York 0.5 percent higher on Friday, erasing earlier losses, futures closed 1.5 percent down for the week.

The International Energy Agency (IEA) reduced demand estimates for OPEC crude this year and next, and said there are doubts about the group’s commitment to cutting production.

Even a pledge by Saudi Arabia and Iraq to strengthen their commitment to the curbs is not helping.

“With the latest rhetoric from the IEA, it looks like the balancing cycle is further protracted, which is not great for the market,” Michael Loewen, a strategist at Scotiabank in Toronto, said by telephone.

Investors need to see either OPEC production really decline or compliance to the output reduction deal improve to believe rebalancing is happening, he said.

Oil just has not been able to stick to the US$50 mark in New York even though US crude inventories are at their lowest since October last year, in part because recent declines are seen mostly as the result of summer demand that is soon to diminish.

OPEC’s rate of compliance with output cuts slid to 75 percent last month, the lowest since the accord started in January, the IEA said.

OPEC said its output is increasing on supplies from Libya, which is exempt from the deal.

If OPEC’s compliance to the deal continues to slow, “the rebalancing is going to take a longer time,” Mark Watkins, a Park City, Utah-based regional investment manager at US Bank Wealth Management, which oversees US$142 billion in assets, said by telephone.

Meanwhile, in the US the number of rigs drilling for crude rose to 768, the highest level since April 2015, as production is set to reach nearly 10 million barrels next year.

Amid all the doubt that supply and demand are coming to balance, futures have been stuck in a tight range of about US$2.5 this month.

West Texas Intermediate (WTI) for September delivery on Friday rose US$0.23 to settle at US$48.82 per barrel on the New York Mercantile Exchange. The contract is down 1.5 percent from last week’s US$49.58 per barrel.

The US benchmark hovered near its 100-day moving average during the session, a sign its recent rally might be losing strength.

Brent for October settlement on Friday rose US$0.20 to end the session at US$52.10 per barrel on the London-based ICE Futures Europe exchange, down 0.6 percent for the week.

Oil market news:

‧ Royal Dutch Shell PLC has restarted four units at its Pernis refinery and more will be brought online in the coming days, an environmental regulator said.

‧ Saudi Arabian Minister of Energy Khalid al-Falih and his Iraqi counterpart, Jabbar al-Luaibi, met in Jeddah and agreed to ensure coordination of their policies, according to a report from the Saudi Press Agency.

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