Oil Falls as Oversupply Concerns Persist
Crude futures advanced Monday morning in volatile trade, amid ongoing concerns that stockpiles will prove resilient to production cuts led by the global oil cartel.
Brent crude, the global oil benchmark, rose 0.2% to $49.02 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.2% at $46.63 a barrel.
Oil prices Monday morning bounced between gains and losses amid market expectations for a surplus in 2018. Forecasts for an inventory draw in the second half of 2017, however, have revived prices in the short term, said Bjarne Schieldrop, chief commodities analyst at SEB Markets.
In the first week of July, U.S. crude inventories fell more than seasonal norms. Meanwhile, the number of rigs drilling for oil in the U.S. rose by just two to 765 in the past week according to Baker Hughes Inc. That has helped oil prices jump back up throughout July, but a pessimistic view for the long-term still persists.
"The rebound is following limits, that's what we see today," Mr. Schieldrop said.
Still, signs of strong demand from China helped support oil prices.
China said Monday its domestic daily crude production averaged some 4 million barrels a day in the first half of 2017, down 5.1% from a year earlier. That comes as imports rose 14% to an average 8.5 million barrels a day, cementing China's position as the world's leading energy importer.
Analysts say as long as oil prices stay relatively low, Chinese refineries will continue to buy in efforts to shore up its inventories. China's growing oil demand is one of the most important pillars that will support the crude market as a global glut persists.
"Overnight, prices found support from data from China pointing to robust oil demand," Commerzbank said in a note.
Market players will be looking to weekly U.S. oil data to determine if the prolonged sub-$50 prices have triggered a deceleration in shale investment. Another highly watched event will be the gathering in Moscow next Monday where some delegates from the Organization of the Petroleum Exporting Countries will discuss adding Nigeria and Libya in the continuing production-curtailment pact.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.2% to $1.56 a gallon. ICE gasoil changed hands at $448.75 a metric ton, up $1.00 from the previous settlement.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
Oil prices reversed gains on Monday, as investors weighed signs of strong demand against a global glut that's proven difficult to reduce.
Light, sweet crude for August delivery settled down 52 cents, or 1.1%, at $46.02 a barrel on the New York Mercantile Exchange, breaking a five-day winning streak after trading as high as $46.68 earlier in the session. Brent, the global benchmark, settled down 49 cents, or 1%, at $48.42 a barrel..
While recent data has indicated increasing consumption of crude oil, market participants have grown wary of high levels of stockpiles in the wake of increasing production around the world.
U.S. production rose near a two-year high in the week ended July 7, according to data from the U.S. Energy Information Administration last week. Meanwhile, attempts by the Organization of the Petroleum Exporting Countries to limit supply have been undermined by growing output by members such as Libya and Nigeria, which are exempt from the deal to curb production.
The International Energy Agency reported Thursday that global oil supplies in June rose by 720,000 barrels a day to 97.46 million a day, on production from both OPEC and non-OPEC members.
"The supply story here just continues to weigh," said John Kilduff, founding partner at Again Capital. "It gets pushed off the main stage at times, but its still lurking and ready to hit prices again."
Earlier Monday, prices edged higher on data showing positive oil demand in China. The country said its domestic daily crude production was down 5.1% in the first half of the year compared to the previous year and imports rose 14%. The IEA also recently raised its 2017 demand forecast by 100,000 barrels a day.
"There's just a lot of pushing and pulling on the market," Mr. Kilduff said.
U.S. crude stockpiles have also fallen by more than expected in the past week, reigniting some hopes that the rebalancing of the oil market is starting to take off. Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates, noted that demand for products like gasoline and diesel have helped the market as well.
"We are emphasizing a surprising improvement in U.S. product demand since late spring as a significant driver of higher...prices," Mr. Ritterbusch said in a Monday note.
Gasoline futures also reversed morning gains, closing down 0.2% to $1.5567 a gallon. Diesel futures fell 1% to $1.4995 a gallon.
Write to Stephanie Yang at stephanie.yang@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
July 17, 2017 16:04 ET (20:04 GMT)