BS: Oil price rises as Saudis cut supplies to US, but global oversupply remains
London â€” Oil edged higher on Friday, boosted by hopes that an Opec output cut was beginning to balance a long-oversupplied market, but benchmark prices were on track for weekly losses as concerns persisted over an excess of crude.
Benchmark Brent crude futures were at $50.86 per barrel at 10.40am GMT, up 30 US cents from their last close.
US West Texas Intermediate (WTI) crude futures were up 30 cents at $48 a barrel. Brent was heading for a weekly fall of roughly 1.7%, while WTI was off just over 1.5%. Analysts said the gains were a sign that the crude benchmarks, trading roughly 12% below the highs reached in January this year, had levelled out.
"The flat price is starting to bottom. A lot of the negativity has been priced in," said Olivier Jakob, MD of PetroMatrix.
Saudi Arabia said its crude exports to the US would fall by about 300,000 barrels per day between February and March, boosting price sentiment. It said the expected drop could help draw down US inventories that stood at a record 533-million barrels in the week to last week.
In the US, shale drilling has pushed up oil production by more than 8% since mid-2016 to just above 9.1-million barrels per day. But US shale producers have left a record number of wells unfinished in Permian, the largest oilfield in the country, a sign that output may not rise as swiftly as drilling activity would indicate.
Still, Saudi exports to other regions remain high despite an effort led by Opec and supported by other producers including Russia, to cut output by 1.8-million barrels per day during the first half of the year.
Thomson Reuters Eikon data shows Opec shipments to Asia, the worldâ€™s biggest and fastest growing oil consuming region, were at 17.6-million barrels per day in March, up more than 5% since January, when the cuts officially started.
Unless Opec extends the curbs beyond June or makes bigger cuts, traders say oil prices are at risk of falling further.
"Opecâ€™s goal of drawing down inventories to normal levels is not going to be reached before their agreement expires on June 30," said US investment bank Jefferies in a note to clients.
Dennis Gartman, founder and editor of the Gartman Letter said the longer-term outlook was for continuing low oil prices.
"This slump is very real â€¦ fracking has only just begun here in the US and it will be transferred swiftly to other countries abroad, so the supply of crude oil is going to increase rather dramatically in the years to come," he told the Reuters Global Markets Forum on Friday.