Oil Ticks Higher After Challenging Week

By Neanda Salvaterra and Jenny W. Hsu Features Dow Jones Newswires

Crude prices edged up on Monday following last week's near-4% drop, as investors anticipate additional data on global stocks.

Continue Reading Below

Brent crude, the global oil benchmark, rose 0.44% to $48.35 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.33% at $45.98 a barrel.

Last Friday, Nigeria reported a pipeline leak which could hamper the exports for Bonny Light exports JBC Energy analysts estimate that "a good portion of the 205,000 b/d planned for June will be shut in."

A softer U.S. dollar may also have supported prices. The Wall Street Journal Dollar Index, which tracks the dollar against a basket of other currencies, fell 0.12% on Monday. Oil is priced in dollars and as the greenback wanes in strength it becomes more affordable for buyers holding other currencies.

"We have had the Nigeria outage return. The market is factoring in a little bit of disruption," said Miswin Mahesh an oil market analyst at Energy Aspects.

Traders are also anticipating additional data. "The selloff last week was very sharp. Our view is that last week's data was a bit of an anomaly, a bit too weak to be true. We'll have to wait and see."

Continue Reading Below

Investors are looking forward to the release of a slew of data this week such as the International Energy Agency's report on Wednesday which includes figures on the state of OECD stocks.

The data will give traders a better picture of whether a global rebalancing is taking place in the oil market.

Last week saw volatile trading: Oil rose nearly 2% early on amid renewed diplomatic spats in the Middle East after Saudi Arabia, the United Arab Emirates and other Persian Gulf states severed diplomatic ties with Qatar, a member of the Organization of the Petroleum Exporting Countries.

Saudi Arabia and others have long accused Qatar of meddling in their internal affairs and backing terrorism, allegations that Qatar has denied.

The rift in the gulf is creating problems for ships transporting fuel.

"The U.A.E. has banned all Qatari-flagged ships as well as foreign-flagged vessels hailing from Qatar from entering its ports, including the bunkering hub of Fujairah," said JBC Energy analysts in a recent report.

Oil also sank 5% last Wednesday as U.S. crude inventories surprisingly grew the week before.

Rising production activities outside of OPEC, particularly in the U.S., prompted UBS last week to cut its 2017 price forecast for WTI oil to $53 a barrel from $55.50. "U.S. shale players are clearly focused on delivering production growth, and plentiful capital is available to fund it," said Jon Rigby, the bank's head of oil research.

A net eight additional oil rigs were in operation in the U.S. last week, putting the figure at 741, the most since April 2015.

Moreover, even though cartel members last month agreed to extend the pact to March next year, the worry is that some OPEC members are getting jittery and possibly cheating.

Bernstein Research said tanker-tracking data suggest compliance to the production-cut deal is likely below the above-100% level seen as of April while reductions in crude exports have been smaller than anticipated.

OPEC's May report, which includes production and export figures, will be released Tuesday.

"The other reason to question the cuts is that oil inventories have increased, rather than decreased," noted Bernstein. Crude stockpiles in developed nations increased 40 million barrels in the first quarter. "The bottom line is that if OPEC are going to successfully defend price, they need to be doing more than they are doing today."

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 0.40% to $1.51 a gallon. ICE gas oil changed hands at $427.50 a metric ton, up $0.25 from the previous settlement.

Write to Neanda Salvaterra at neanda.salvaterra@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

June 12, 2017 06:54 ET (10:54 GMT)