Oil Edges Up as Investors Cash Out After a Weak April
Oil prices rebounded on Friday as traders appeared to be closing out a recent raft of bearish bets.
April turned out to be a bad month for oil, with stockpiles still growing at times despite widespread expectations that global output cuts would start causing them to drain. U.S. crude finished the month down 2.5%, causing back-to-back monthly losses for the first time since last summer.
With both the trading week and month ending Friday, and the contracts for both gasoline and diesel expiring, many traders took the moment to recalibrate, analysts said. Oil markets had all had at most just two winning sessions in the past two weeks, and many of the traders who sold contracts during that time are likely to want to close out those positions to square their trading books, analysts said.
Light, sweet crude for June delivery settled up 36 cents, or 0.7%, at $49.33 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, gained 29 cents, or 0.6%, to $51.73 a barrel on ICE Futures Europe. For the month, Brent ended down $1.10, or 2.1%, for the month, its fourth losing month in a row, the worst such stretch since early 2016.
"There's been such a consecutive down streak...you are potentially oversold," said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. He added that many traders will be extra sensitive to weekends and expirations now because the next meeting of the Organization of the Petroleum Exporting Countries is now just weeks away, potentially creating market-moving headlines.
The market lately has been dominated by OPEC. The cartel agreed late last year with other big global exporters to curtail global production by about 1.8 million barrels a day. Although some crude stocks globally have fallen, some U.S. stocks have been resilient, thwarting a larger rally.
That has put OPEC and oil bulls into a position now that they cannot get the rally they hoped for unless OPEC agrees to extend its cuts during their coming meeting on May 25, analysts at TD Securities in Toronto said in a note late Friday afternoon. The exporters may not need to really cut output through the rest of the year, but traders could very well lose faith the cuts will make their impact if OPEC doesn't at least say it will keep cutting, the TD analysts said.
"Prices will be range-bound for the most of May -- but volatile," said TD's team, led by Bart Melek, head of commodity strategy. "They will test the lower bound on negative news and bounce higher on any hope that producers' supply adjustments will continue for the balance of the year."
Some cartel members have come out with potentially worrying statements about the conditions they require for OPEC's supply action to be extended.
Iraq Oil Minister Jabbar al-Luaibi has said his country wants to be able to produce more, while "Iran is demanding that it be allowed to 'significantly' increase its oil production," according to Commerzbank.
However, Tehran is already producing close to its maximum capacity of 4 million barrels a day, analysts say.
Meanwhile, rebounding U.S. oil output means crude prices could remain range-bound a bit longer. The number of rigs drilling for oil in the U.S. rose by nine in the past week to 697, now double from the low it fell to less than a year ago, according to data oil-field services company Baker Hughes Inc. on Friday.
"We don't expect prices to rise too much before the OPEC meeting next month," said Daniel Hynes, commodities analyst at ANZ Bank.
But if the output ceiling is extended, oil could move back toward $55 and possibly reach $60 a barrel in the second half of 2017, he added.
Gasoline futures lost 0.2 cent, or 0.1%, to $1.548 a gallon, lowest settlement since Feb. 28. It lost ground in 11 of the last 13 sessions, leading to its biggest declines in one month since July, that being 15.21 cents, or 8.9%. It has also now posted three straight losing weeks, losses of 11% over that span, its worst three-week stretch since November.
Diesel futures lost 0.32 cent, or 0.2%, to $1.504 a gallon, its lowest settlement since March 27. It has lost ground in 10 of 11 sessions, causing the worst two-week stretch since January 2016. It lost 8.8% over that span, including losses this week of 4.93 cents, or 3.1%. For April, it lost 6.96 cents, or 4.4%.
--Austen Hufford contributed to this article.
Write to Timothy Puko at tim.puko@wsj.com, Neanda Salvaterra at neanda.salvaterra@wsj.com and Biman Mukherji at biman.mukherji@wsj.com
(END) Dow Jones Newswires
April 28, 2017 16:30 ET (20:30 GMT)