A weakening US dollar saw US oil futures prices settled flat on Friday as global Brent crude notched up a small gain that did nothing to erase yet another loss for the sixth week in a row.
Talk of production cuts among major oil producers provided some support to prices, but rising supplies and stocks, especially in the US, has pushed the market down for the week.
Evidence of weakening global economic growth (in China and Japan)and the decision by the Trump administration to grant waivers to major buyers of Iranian crude following the start of supposedly tougher sanctions added further pressure.
Sanctions had been expected to keep most Iranian oil off the market, but it hasn’t and global supplies are growing, driven by rising US output and stocks – US production is running around 11.7 million barrels a day and US drilling activity is still rising.
Traders ignored talk that the Saudis and others in OPEC are talking about an output cut of 1.4 million barrels per day (bpd) to stem the sharp slide in crude prices.
The existing cap of 1 million barrels a day was cut earlier this year from 1.8 million barrels a day. Russia so far is not supporting the idea of a higher cap.
December West Texas Intermediate crude settled unchanged at $US56.46 a barrel, down from the day’s high of near $US58. This contract expires at Monday’s close of trading.
That took the fall for the week to 6.2% for WTI.
The global crude pricing benchmark – January Brent added 14 cents, or 0.2%, to $US66.76 a barrel on Friday. The contract saw a 4.9% retreat over the week and both remain in bear territory (a fall of 20% or more from the most recent peak – this time in early October).
Supply concerns continue to drive trading. On Thursday, the Energy Information Administration (EIA) reported that US crude stocks rose for an eighth week —up 10.3 million barrels for the period ended November 9 to 412 million barrels. But that is also lower than a year ago by 18.9 million barrels.
Crude stocks at Cushing, Oklahoma., the delivery hub for Nymex oil futures, saw another large build-up last week, while US production rose to another record of 11.7 million barrels a day, up from 9.6 million barrels at the same time last year, according to EIA data.
“Price reaction to the U.S. inventory data shows that negative news is now largely priced in …this was the eighth consecutive weekly rise in U.S. crude oil stocks, during which time stocks soared by a total of 48 million barrels. This highlights the need for OPEC to cut production,” said Carsten Fritsch and the commodities team at Commerzbank, in a note on Friday.
Oil services group, Baker Hughes on Friday reported that the US oil-rig count rose for a second week, up by 2 at 888.
And US natural-gas futures ended the week up 14.9% higher, after settling Wednesday at the highest in over four years. December natural gas added 5.8% to $US4.272 per million British thermal units as early snowstorms and cold weather hit the Midwest and the northeast, especially New York and New England states.
This time a year ago, Opec forecast that US oil output in 2018 would be 540,000 barrels a day (b/d) higher than in 2017. But in its latest monthly report, it now sees US production 1.5 million b/d higher than a year ago, matching global demand growth that it calculates at broadly the same level
In fact, the US, Russia and Saudi Arabia are pumping crude at record levels, causing global supply to significantly outrun demand, a monthly update from the International Energy Agency showed last week.
The IEA said the rise in oil output from the world’s three biggest producers is holding total global supply steady, at around 100.7 million barrels a day last month. That’s 2.6 million barrels a day higher than the same period last year.
The IEA said that since May, global oil output has climbed by 1.8 million barrels a day. The US has provided 1 million barrels a day of growth and Saudi Arabia and Russia added 620,000 barrels a day and 445,000 barrels a day, respectively.
That’s why the gradual fall in Iranian oil supplies because of the Trump sanctions, have failed to have any impact and seen prices peak and slump 20% or more.
