Stars align against crude oil prices as $50 comes under threat

Crude rose 4 cents a barrel Thursday to settle at $48.36 a barrel in NY.

U.S. West Texas Intermediate futures were at $48.31 a barrel, up 65 cents, or 1.4 percent.

Although crude oil prices remained lower than last week, they were propped up somewhat Thursday by the U.S. Energy Information Administration's (EIA) report on a drop in crude oil inventories.

USA crude production last week was up by almost 500,000 barrels per day (bpd) from year-earlier levels, straining OPEC's efforts to reduce global oversupply.

Crude stockpiles were down to 6.4 million barrels in the week to May 26, beating analyst expectations for a decrease of 2.5 million barrels.

Oil headed for its biggest weekly drop in four weeks as USA supply data signaled that OPEC's efforts to re-balance oversupplied markets need more time.

There was some positive rhetoric from OPEC Secretary Barkindo with remarks that crude storage in some United States hubs had already fallen to the 5-year average and prices edged away from intra-day lows.

The Organization of the Petroleum Exporting Countries (OPEC) and non-members are committed to reducing global oil inventories to a five-year average, said Saudi Energy Minister Khalid Al-Falih in Moscow on Wednesday. The United States is not participating in the self-imposed production cuts.

Growing worry over crude oversupply after Libya increased output has sent global oil prices lower, which is likely to result in a price cut of NT$0.5 (US$0.017) per liter for gasoline and diesel at CPC Corp. The global benchmark crude traded at a premium of US$2.16 to WTI.

Further gains may be limited for the two major oil benchmarks as bearish news keeps coming from the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russian Federation that are locked in a battle against rising shale production in their efforts to boost prices.

"The ongoing threat to investor sentiment when it comes to the oil markets is that no matter what OPEC try to do to rebalance the ongoing oversupply in the markets, US Shale producers will be able to offset the efforts by increasing inventories from their side".

"U.S. crude oil exports were a strong contributor to the crude oil stock draw".

Russia's May oil output was 10.94 million bpd, in line with its commitments to cut production, according to sources on Wednesday.

There were underlying concerns surrounding increased supplies from Nigeria and Libya given with no immediate move by OPEC to bring these two producers into the production agreement and cap output.

While OPEC and its partners agreed on May 25 keep output constrained through to early 2018 in a bid to clear a global glut, the Rosneft CEO said non-participants such US shale are using the deal to strengthen their market position.

  • Zachary Reyes