Oil Prices Up as Bigger Producers Stick to Cuts

By Georgi Kantchev and Jenny W. Hsu Features Dow Jones Newswires

Oil prices ticked higher on Friday, capping a tumultuous week for a market that continues to be plagued by a global glut.

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Brent crude, the global oil benchmark, traded 0.4% higher at $45.40 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.4% at $42.93 a barrel.

Signs that big producers are abiding by their deal to limit output and weather-related output challenges in the U.S. supported prices. The recent moves higher came after crude plunged into a bear market this week for the first time since last summer, as the oversupply is so far proving immune to the limits set by the Organization of the Petroleum Exporting Countries and its big-producer allies including Russia.

A monitoring committee made up of OPEC members and producers outside the group on Thursday said that compliance to the deal reached 106% in May, the highest since the deal was first clinched late last year.

In the U.S., production growth and crude inventories may show a decline next week as inclement weather in the Gulf of Mexico has shut a number of oil rigs and platforms, analysts say. According to JBS Energy, 300,000 barrels a day of production were shut in.

Any signs of deceleration in U.S. production would support the market, which is still mired in surplus. But for now, many analysts remain pessimistic about oil's outlook.

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"It is doubtful whether the end of the downward spiral--a barrel of Brent has plunged by 17% or around $9 over the past four weeks--has already been reached," said analysts at Commerzbank.

High global oil inventories are "raising market concerns about the efficacy of OPEC market management," said Jason Gammel, analyst at Jefferies. "We remain of the view that inventories will [decline in the second half of the year], but empirical evidence of this is likely necessary for oil prices to inflect into an upward trend."

Later Friday, energy investors will be focused on the weekly U.S. rig count. If the count, which is a rough proxy for the activity in the industry, increases again, it would be the 23rd consecutive weekly climb, deepening concerns that U.S. output is offsetting the OPEC cuts.

Analysts expect U.S. production to climb to a record next year, potentially even vaulting American producers ahead of Saudi Arabia in daily output.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 0.4% to $1.44 a gallon. ICE gas oil changed hands at $409.50 a metric ton, down $2.75 from the previous settlement.

Write to Georgi Kantchev at georgi.kantchev@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

Oil prices ticked higher Friday, capping a tumultuous week for a market that continues to be plagued by a global glut.

Light, sweet crude for August delivery recently gained 35 cents, or 0.8%, to $43.09 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 35 cents, or 0.8%, to $45.57 a barrel on ICE Futures Europe. Despite the gains, both are on pace for their fifth-straight weekly loss, about 3.7%.

Signs that big producers are abiding by their deal to limit output and weather-related output challenges in the U.S. supported prices. The recent moves higher came after crude plunged into a bear market this week for the first time since last summer, as the oversupply is so far proving immune to the limits set by the Organization of the Petroleum Exporting Countries and its big-producer allies including Russia.

"Yes, we remain long-term bearish, but traders should be weary of selling down here," the Chicago brokerage iiTrader told clients in a note Friday. "Sentiment is a little too bearish at this moment and ahead of the weekend."

A monitoring committee made up of OPEC members and producers outside the group on Thursday said that compliance to the deal reached 106% in May, the highest since the deal was first clinched late last year.

In the U.S., production growth and crude inventories may show a decline next week as inclement weather in the Gulf of Mexico has shut a number of oil rigs and platforms, analysts say. According to JBS Energy, 300,000 barrels a day of production were shut in.

Any signs of deceleration in U.S. production would support the market, which is still mired in surplus. But for now, many analysts remain pessimistic about oil's outlook.

"It is doubtful whether the end of the downward spiral -- a barrel of Brent has plunged by 17% or around $9 over the past four weeks -- has already been reached," said analysts at Commerzbank.

High global oil inventories are "raising market concerns about the efficacy of OPEC market management," said Jason Gammel, analyst at Jefferies. "We remain of the view that inventories will [decline in the second half of the year], but empirical evidence of this is likely necessary for oil prices to inflect into an upward trend."

Later Friday, energy investors will be focused on the weekly U.S. rig count. If the count, which is a rough proxy for the activity in the industry, increases again, it would be the 23rd consecutive weekly climb, deepening concerns that U.S. output is offsetting the OPEC cuts.

Analysts expect U.S. production to climb to a record next year, potentially even vaulting American producers ahead of Saudi Arabia in daily output.

Gasoline futures recently gained 0.2% to $1.437 a gallon and diesel futures gained 0.5% to $1.3787 a gallon.

Write to Georgi Kantchev at georgi.kantchev@wsj.com, Jenny W. Hsu at jenny.hsu@wsj.com and Timothy Puko at tim.puko@wsj.com

(END) Dow Jones Newswires

June 23, 2017 12:22 ET (16:22 GMT)