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Oil hovers above $52

Oil futures pushed to session highs on Tuesday, adding to more than a week straight of gains which have allowed the U.S. benchmark to move back above $50 a barrel for the first time in two months, lifted by growing optimism that the market is tightening.

Analysts say a swath of positive news the past two weeks, such as ebbing U.S. inventories and slowing production, has polished investor confidence in oil, which has been in the doldrums due to a large persistent glut.

That as data due Wednesday are expected to show U.S. crude stockpiles fell further last week. A “steady strengthening in demand expectations” have also lifted oil prices recently, said the Federal Reserve Bank of New York in its recent oil report.

“I think this rally will sustain a little while longer because the attitude is changing,” said Grace Liu, the head of petrochemical research at Guotai Junan International, pointing to Saudi Arabia’s “rebalance-first” approach as the main driver behind recent optimism.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU7, +0.16%  recently traded up 11 cents, or 0.2%, at $50.27 a barrel in the Globex electronic session. October Brent crude LCOU7, +2.19% on London’s ICE Futures exchange was steady at $52.65.

For nearly three years, the kingdom and other members of the Organization of the Petroleum Exporting Countries, together with Russia, have pumped crude at high rates in a bid to drown out smaller US producers. The result: prices plunged to a 13-year low and global inventories surged. It also tipped the global supply-demand balance, causing economic woes for some nations as their usual stream of oil revenue shrank.

To reset, OPEC and a handful of non-US oil players have been cutting output this year. But prices have continued to fall, and many are still skeptical of the long-term effect of imposing a cap on production when American output has been rebounding. In May, total U.S. crude production grew 0.6% from April to hit the highest daily average for a month this year, the Energy Information Administration said Monday.

Still, the same data also reveal growth might be sputtering, bolstering views that high-cost producers in the U.S. might be pulling back amid still-low prices. May’s growth was the second slowest of 2017.

But it might still be premature to assume shale production will cool into year-end because capital-spending reductions the past several years have largely been a function of companies “being able to get more for every dollar invested,” said Energy Aspects.

Investors remain in wait-and-see mode over whether the U.S. will impose sanctions against Venezuela — a member of OPEC and a major exporter of U.S. to the U.S. — after a referendum over the weekend that gave Venezuelan President Nicolás Maduro overwhelming power to redraft the country’s constitution.

The vote was widely condemned, and the U.S. Treasury on Monday said it has frozen the assets of Maduro, but stopped short of imposing new sanctions on the country’s oil industry.

Among refined products, Nymex September diesel gained 0.3% to $1.6724 a gallon, reformulated gasoline blendstock rose 0.2% to $1.68 and August ICE gasoil climbed 1.2% to $495 per metric ton.

Source: marketwatch.com

Oil futures pushed to session highs on Tuesday, adding to more than a week straight of gains which have allowed the U.S. benchmark to move back above $50 a barrel for the first time in two months, lifted by growing optimism that the market is tightening.

Analysts say a swath of positive news the past two weeks, such as ebbing U.S. inventories and slowing production, has polished investor confidence in oil, which has been in the doldrums due to a large persistent glut.

That as data due Wednesday are expected to show U.S. crude stockpiles fell further last week. A “steady strengthening in demand expectations” have also lifted oil prices recently, said the Federal Reserve Bank of New York in its recent oil report.

“I think this rally will sustain a little while longer because the attitude is changing,” said Grace Liu, the head of petrochemical research at Guotai Junan International, pointing to Saudi Arabia’s “rebalance-first” approach as the main driver behind recent optimism.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU7, +0.16%  recently traded up 11 cents, or 0.2%, at $50.27 a barrel in the Globex electronic session. October Brent crude LCOU7, +2.19% on London’s ICE Futures exchange was steady at $52.65.

For nearly three years, the kingdom and other members of the Organization of the Petroleum Exporting Countries, together with Russia, have pumped crude at high rates in a bid to drown out smaller US producers. The result: prices plunged to a 13-year low and global inventories surged. It also tipped the global supply-demand balance, causing economic woes for some nations as their usual stream of oil revenue shrank.

To reset, OPEC and a handful of non-US oil players have been cutting output this year. But prices have continued to fall, and many are still skeptical of the long-term effect of imposing a cap on production when American output has been rebounding. In May, total U.S. crude production grew 0.6% from April to hit the highest daily average for a month this year, the Energy Information Administration said Monday.

Still, the same data also reveal growth might be sputtering, bolstering views that high-cost producers in the U.S. might be pulling back amid still-low prices. May’s growth was the second slowest of 2017.

But it might still be premature to assume shale production will cool into year-end because capital-spending reductions the past several years have largely been a function of companies “being able to get more for every dollar invested,” said Energy Aspects.

Investors remain in wait-and-see mode over whether the U.S. will impose sanctions against Venezuela — a member of OPEC and a major exporter of U.S. to the U.S. — after a referendum over the weekend that gave Venezuelan President Nicolás Maduro overwhelming power to redraft the country’s constitution.

The vote was widely condemned, and the U.S. Treasury on Monday said it has frozen the assets of Maduro, but stopped short of imposing new sanctions on the country’s oil industry.

Among refined products, Nymex September diesel gained 0.3% to $1.6724 a gallon, reformulated gasoline blendstock rose 0.2% to $1.68 and August ICE gasoil climbed 1.2% to $495 per metric ton.

Source: marketwatch.com

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