Oil Heads for Weekly Loss as Doubts Over Rebalancing Persist

(Bloomberg) 

Oil fell in New York, heading for a weekly loss as a decline in U.S. crude stockpiles failed to convince investors that global markets are re-balancing.

Futures dropped as much as 3.2 percent even after U.S. data on Thursday showed the nation’s crude stockpiles dropped by 6.3 million barrels, three times as much as expected. Investors remain doubtful that OPEC-led production cuts will clear a global glut, after Russia was said to oppose deepening the measures and Saudi Arabia showed less commitment than earlier in the year.

Oil’s longest rally in 2017 faltered this week after Russia was said to oppose any proposal for deeper supply cuts by the Organization of Petroleum Exporting Countries and its partners. Crude in New York and London remain in a bear market amid concern rising global output will offset the OPEC-led curbs.

“Oil remains volatile, unable to hold onto gains even after strong inventory draws in the U.S.,” said Jan Edelmann, an analyst at HSH Nordbank AG in Hamburg. “While the strong draws are a step in the right direction, multiple weeks of the same are now needed for the rebalancing.”

West Texas Intermediate for August delivery lost as much as $1.47 to $44.05 a barrel on the New York Mercantile Exchange and was at $44.57 as of 1:11 p.m. in London. Total volume traded was about 75 percent above the 100-day average. The contract gained 39 cents to $45.52 Thursday, rebounding from the biggest loss in four weeks. Prices are down 3.2 percent this week.

Brent for September settlement lost as much as $1.48, or 3.1 percent, to $46.63 a barrel on the London-based ICE Futures Europe exchange. The contract added 32 cents to $48.11 on Thursday. Prices are down 1.5 percent this week. The global benchmark traded at a premium of $2.37 to September WTI.

U.S. crude production increased by 88,000 barrels a day last week to 9.34 million, the EIA said in a report Thursday. Output had slid by 100,000 barrels a day through June 23 amid field maintenance in Alaska and the impact of tropical storm Cindy. Gasoline stockpiles fell by 3.7 million barrels.

Russia wants to stick to the current OPEC deal and would oppose any proposal for deeper production cuts at the group’s ministerial meeting later this month, four Russian government officials said earlier this week. Russia remains willing to weigh any proposals from its allies at a July 24 summit in St. Petersburg, the Energy Ministry said in a statement Friday.

Oil-market news:

Russian refiners will halt an average 940,000 barrels a day of capacity in September, the most in 21 months, according to the Energy Ministry. Now is the time to maximize the impact of OPEC’s oil production cuts, yet the market is still waiting for the group’s biggest member to show it’s doing “ whatever it takes” to eliminate the global oversupply. OPEC shipments will decrease to 23.97 million barrels a day in the four weeks to July 22 compared with the period to June 24, tanker-tracker Oil Movements said in a weekly report. OPEC is considering putting a limit on how much Nigeria and Libya can pump, the Wall St. Journal reported, citing unidentified delegates. The world’s biggest energy traders are betting shale oil production is here to stay with deals to secure access to U.S. supply and infrastructure.