Oil Market Quiet in Absence of Clear Signs from OPEC
By Jenny W. Hsu
Crude futures were essentially flat in Asian trading as investors continue to wait whether the Organization of the Petroleum Exporting Countries will extend ongoing production cuts deeper into 2017.
Prices skidded midweek amid continued growth in U.S output and a surprise increase in gasoline inventories there, but have since stabilized.
However, some analysts say the outlook isn't good and that another leg lower looms until there's clarity on whether the OPEC-led production caps will be extended.
On Thursday, Saudi Arabia Energy Minister Kalid al-Falih said a handful of cartel members have reached a tentative agreement to cut more supplies because global crude supplies remain above five-year averages. But he added a caveat that the extension could be as short as three months.
Oil prices ticked higher initially after the comments overnight, but quickly lost steam as analysts say the remark only stirred up more uncertainty.
"The length of the extension, the number of participating countries and the production to be sidelined remain key unknowns," said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia. If an extension is only for one quarter, such a move may be moot for the market's long-term health since it means non-US producers will increase output anew, potentially sending stockpiles higher again.
There's also question as to whom Mr. al-Falih was referring in being supportive of further production cuts.
"If it is Venezuela, then who cares," said Michael McCarthy, a chief analyst at CMC Markets. "But if Russia is on board to cut more, then that's something."
As part of the agreement signed with OPEC, Russia consented to cut output by 300,000 barrels a day by the end of April, roughly 17% of the volume that OPEC and 11 other non-cartel producers agreed to reduce in the first half of 2017.
"Traders are no doubt stuck in a rock and a hard place," he added.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June was recently up a penny in the Globex electronic session at $50.72 a barrel. June Brent crude on London's ICE Futures exchange was flat at $52.99. Nymex May gasoline and diesel were essentially flat at $1.67 and $1.5796 a gallon, respectively, while ICE gasoil eased 0.2% to $476 a metric ton.
Write to Jenny W. Hsu at [email protected]