Oil prices head for big weekly loss as glut lingers

Oil prices moved higher following the EIA inventories data on Thursday, but there was selling pressure above $49.00 p/b and prices retreated again late in the USA session.

USA crude production last week was up by almost 500,000 barrels per day (bpd) from year-earlier levels and hit 9.34 million bpd, its highest since August 2015.

U.S. West Texas Intermediate crude CLc1 futures dropped 87 cents, or 1.81 percent, to $47.46 per barrel.

Counting Nigeria and Libya, total Opec oil output remained about 450,000 barrels a day above the target set out in the Nov 30 production agreement, putting the group only about 66 per cent of the way toward its goal, compared with 90 per cent last month, according to data compiled by Bloomberg.

The survey of 34 economists and analysts predicted Brent crude would average $55.57 per barrel in 2017, lower than last month's forecast of $57.04.

Futures slumped as much as 1.8 percent in NY while Brent crude in London slid below $50 a barrel. US inventories, however, fell 6.4 million barrels last week, their eighth straight weekly drawdown.

The US Energy Information Administration (EIA) report on stockpiles is due later on Thursday, delayed by a day because of the Memorial Day holiday on Monday.

The declines were good news for oil markets, where prices have trended lower recently over concerns that rising US production is offsetting output cuts by OPEC and other major producers and keeping global markets awash in oil.

OPEC members Libya and Nigeria are exempt from the cuts, while USA shale oil producers are not part of the agreement and have been ramping up production.

Output from Libya, exempt from OPEC's deal to reduce supply, rose to the highest since October 2014 as production from its biggest field increased. Crude stockpiles were down to 6.4 million barrels and crude production by United States rose to 9.34 million barrels per day. "This very steep growth comes with US oil prices locked below the price most analysts estimated as a minimum to grow USA oil production". OPEC and Russian Federation agreed to extend production cuts another nine months in an effort to keep prices above $50 a barrel.

Brent crude tumbled below $50 on Friday, heading for a second straight week of losses, on worries that U.S. President Donald Trump's decision to abandon a climate pact could spark more crude drilling in the United States, worsening a global glut.

"If he actually withdraws the U.S from the climate accord, this would signal his intention to further roll-back emission regulations that would favor the use and demand of fossil fuels, thus giving a much needed boost to oil prices", said Jonathan Chan, investment analyst at Phillip Futures in Singapore.

  • Zachary Reyes