Oil nudges higher on tightening supplies, weak dollar

Dhaka,  Wed,  20 September 2017
Published : 18 Aug 2017, 21:14:08
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Oil nudges higher on tightening supplies, weak dollar

AMSTERDAM, Aug 18 (Reuters): Oil prices edged higher on Friday, with investors offered some encouragement from data hinting that oversupply was easing steadily and a weaker dollar.

But prices were still on track to close the week 2.0 to 3.0 per cent lower after concerns about weaker Chinese oil demand weighed earlier in the week.

At 0935 GMT, benchmark Brent crude futures LCOc1 were up 7.0 cents at $51.10 a barrel on the day but still about 2.0  per cent lower on the week.

US West Texas Intermediate (WTI) crude futures CLc1 were up 16 cents at $47.25 a barrel, although they were also set to end the week more than 3.0 per cent lower.

"Falling US commercial stocks are supportive and I also believe that high US product demand, and gasoline demand in particular, is helping too," Tamas Varga, senior analyst at London brokerage PVM Oil Associates, said of Friday's move up.

He also said a weaker dollar was bullish for oil prices as equity markets piled pressure on the greenback.

The Brent forward curve has moved from contango into backwardation, where prices for immediate delivery are higher than those for the three future months. A backwardated market is considered a bullish sign for prices since it indicates demand is outpacing supply.

Signs of supply tightness have started appearing in the United States (US), the world's biggest oil consumer.

Despite a 13 per cent jump in production C-OUT-T-EIA since mid-2016 to 9.5 million bpd, the country's commercial crude inventories C-STK-T-EIA have fallen 13 per cent from their March records to below 2016 levels.

An earlier report from Singapore adds: Oil prices were largely steady on Friday, torn between a broad-based selloff across markets and signs that crude supplies are gradually tightening.

Brent crude futures, LCOc1 the international benchmark for oil prices, were at $51.12 per barrel at 0711 GMT, up 9.0 cents from their last close but still set for a weekly drop of some 2.0 per cent.

US West Texas Intermediate (WTI) crude futures CLc1 were at $47.17 a barrel, up 8.0 cent but also on track to fall over the week, down over 3.0 per cent.

Oil prices have been weighed down amid a selloff across markets, including US and Asian stocks, where investors voted with their feet amid growing scepticism that US President Donald Trump, embroiled in controversy, would achieve his economic agenda.

The overall softness in financial markets added to the perception that oil supply remains higher than demand despite producer efforts to reduce output. The Organisation of the Petroleum Exporting Countries (OPEC), together with non-OPEC producers like Russia, has pledged to restrict output by 1.8 million barrels per day (bpd) between January this year and March 2018.

"Sentiment in oil markets remains weak," US investment bank Jefferies said.

Oil is declining even amid signs that crude markets are tightening.
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