Oil Extends Gains, But Markets Remains Cautious

By Jenny W. Hsu Features Dow Jones Newswires

Crude-futures are wrapping up the week with the longest streak of gains since April, as some investors bet on a slowdown in U.S. production to support prices.

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The rebound since last Thursday has been further boosted by official data that showed U.S. crude production falling 100,000 barrels a day last week. Though small, the decrease was enough to make some investors suspect that low prices are driving out the marginal high-cost producers in the U.S., analysts say. U.S. crude prices are down 7% this month, and more than 16% since the start of the year.

There is also hope that the U.S. summer driving demand would soak up surplus gasoline there.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at $45.11 a barrel at 0108 GMT, up $0.18 in the Globex electronic session. August Brent crude on London's ICE Futures exchange rose $0.19 to $47.61 a barrel. Both benchmarks have risen over 5% this week.

Still, investors remain skeptical that oil prices have stabilized because fundamentals remain quite bearish. Many industry observers worry the oil glut is at risk of getting bigger as Libya and Nigeria crank up production.

"The market has become so responsive to data points that change from week to week," said Vivek Dhar, commodities strategist at Commonwealth Bank of Australia. "Last week we saw U.S. production fall, next week we could see a gain and the markets would be selling again."

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How U.S. shale producers respond to the prolonged low prices will have a large impact on prices for now, analysts say. "Has prices fallen so low that it has become a point of discomfort for the American producers? That's the question to ask," said Mr. Dhar.

Meanwhile, demand growth globally is also clouding the outlook on crude prices. BMI Research data show that in the first quarter, U.S. fuel consumption was flattish compared with the same period last year, while South Korea showed a smaller-than-expected growth and Japan's demand contracted by 3% on year.

"Overall the risk to our global demand outlook lies to the downside," the research firm said.

Refined products were mixed early Friday. Nymex reformulated gasoline blendstock was up 0.2% at $1.488 a gallon, July diesel also up 0.2% at $1.45, while July ICE gasoil was off 0.3% at $434 a metric ton.

Write to Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

June 29, 2017 22:58 ET (02:58 GMT)