Crude futures bounced back from five-month lows Friday, following a week of steep losses globally as investors continue to worry about brimming crude inventories.
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Even with Friday's rebound, prices have tumbled around 5% this week, putting oil at its lowest levels since late November, when the Organization of the Petroleum Exporting Countries and other big oil producers agreed to cut output for six months. Most of the losses came after data on Wednesday showed a smaller-than-expected fall in U.S. oil inventories and rising production.
"People were starting to accept that $50 was the floor, but that's changing--$50 is becoming the ceiling again," said Ric Navy, senior vice president for energy futures at RJ O'Brien & Assocites.
U.S. crude futures recently traded up 83 cents, or 1.83%, at $46.35 a barrel on the New York Mercantile Exchange. Brent crude, the global oil benchmark, rose 89 cents, or 1.84% to $49.27 a barrel on London's ICE Futures exchange.
The move higher came after a sudden 3% drop in Asian trading overnight, pushing prices low enough that buyers began to re-enter the market, analysts said.
"There isn't any more selling to hold it down," said Gene McGillian, research manager at Tradition Energy.
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Still, prices are poised to end the week sharply lower, as investors' confidence in OPEC-led production cuts is quickly waning. The cuts haven't made as big a dent in global inventories as intended, and expectations that production caps will be extended this month also haven't offered much support to prices.
Analysts had expected the cuts to prompt U.S. shale producers to pump more crude, but the rebound in output has surpassed expectations. U.S. production averaged 9.3 million barrels a day last week, its highest since August 2015.
"OPEC's failure to raise oil prices is fundamentally linked to their failure to bring down petroleum inventories," said analysts at brokerage Bernstein in a note.
The cartel aims to reduce global stockpiles to their five-year average, a goal that is only attainable if the cuts continue, industry insiders say. As such, most believe an extension is a foregone conclusion. The pressing question is for how long and who is on board.
But even as many traders and investors have lost patience waiting for OPEC's production cuts to translate into falling oil stockpiles, analysts have remained optimistic that oil supplies will tighten in the second half of the year and said this week's selloff was overdone.
"This picture does not suggest that fundamentals are markedly deteriorating and the market should be setting new lows -- quite the opposite," Credit Suisse analysts wrote in a research note. "It is too early to throw in the towel from a supply/demand perspective."
Gasoline futures rose 2.34 cents, or 1.58%, to $1.5046 a gallon. Diesel futures rose 3.12 cents, or 2.21%, to $1.4435 a gallon.
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(END) Dow Jones Newswires
May 05, 2017 11:55 ET (15:55 GMT)