Oil Prices Hold on Mixed Supply Signals

By Justin Yang and Biman Mukherji Features Dow Jones Newswires

Crude oil futures fell Monday morning as concerns about persistent U.S. oversupply overshadowed a potential production curb from Libya and Nigeria.

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Brent crude, the global oil benchmark, fell 0.96% to $46.26 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 1% at $43.77 a barrel.

Data from the U.S. Energy Information Administration last week showed U.S. production increased to nearly 9.34 million barrels a day, up from 9.25 million barrels a day the week prior. Production was up nearly 11% from a year ago and nearly back at its 10-month high.

Friday's updated rig count from Baker Hughes Inc. also pointed to production increases. Oil producers added seven more rigs to their working fleet, rising to 763, up more than double from the 351 at work a year ago.

"In the short term, oil prices may remain under pressure because of the U.S. glut in supplies. But the medium term is looking much better because I expect market rebalancing will kick in by late 2017 or early 2018," said Gananasekar Thiagarajan, director of Commtrendz Risk Management.

The Organization of Petroleum Exporting Countries is considering putting a cap on how much oil members Nigeria and Libya can pump, cartel delegates said. Due to internal political unrest, the two countries have been exempt from OPEC's production cut deal, which has been extended through to next March. The production limits could be voted on again when the organization meets on Nov. 30 in Vienna.

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Libya's crude-oil output has surged to more than one million barrels a day, up from 400,000 in October, while Nigeria's output has risen to 1.6 million barrels a day, up from 200,000 barrels a day in October, according to JBC, a Vienna-based energy-industry consultancy.

"We might be getting some bullish sentiment in November, but that's several months of pain for bulls because we see these U.S. numbers and rig count numbers go up every week," said Hamza Khan, head of commodity strategy at ING Bank.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.94% to $1.48 a gallon. ICE gasoil changed hands at $426.50 a metric ton, down $1.50 from the previous settlement.

Write to Biman Mukherji at biman.mukherji@wsj.com

Crude oil futures flip-flopped between losses and gains Monday with concerns about persistent U.S. oversupply canceling out talk of production curbs in Libya and Nigeria and signs stockpiles may be falling in the U.S.

Light, sweet crude for August delivery recently lost 7 cents, or 0.2%, to $44.16 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, lost 3 cents, or 0.1%, to $46.68 a barrel on ICE Futures Europe. Both had been at losses much deeper, with U.S. oil trading below $44 a barrel for hours until the traditional start of U.S. trading hours.

Oil prices went into a hard retreat last week in part tied to data showing another production growth spurt in the U.S. It has restarted the downward momentum that has derailed a widely-expected rally since early March, brokers said.

Prices did briefly bounce to gains after data provider Genscape said stockpiles at Cushing, Okla., shrank by 2.1 million barrels from June 30 to July 7, according to a person who had reviewed the report. Cushing is the delivery point for the benchmark U.S. West Texas Intermediate oil contract, and is often regarded as a key point for judging supply and demand trends.

But the market is also likely simply rebounding from last week's sharp fall, said Ric Navy, senior vice president for energy futures at brokerage R.J. O'Brien & Associates LLC. It dropped 6% in just three sessions to end the week, a steep fall that might lead bearish traders to close out winning positions and take profits.

"It just gives you another selling opportunity. I'm still expecting lower lows," Mr. Navy added. "The market hasn't really proven itself yet to get into rally mode."

Part of the selloff has come from U.S. Energy Information Administration data last week that showed U.S. production increased to nearly 9.34 million barrels a day, up from 9.25 million barrels a day the week prior. Production was up nearly 11% from a year ago and nearly back at its 10-month high.

Friday's updated rig count from Baker Hughes Inc. also pointed to production increases. Oil producers added seven more rigs to their working fleet, rising to 763, up more than double from the 351 at work a year ago.

"We might be getting some bullish sentiment in November, but that's several months of pain for bulls because we see these U.S. numbers and rig count numbers go up every week," said Hamza Khan, head of commodity strategy at ING Bank.

The Organization of the Petroleum Exporting Countries is considering putting a cap on how much oil members Nigeria and Libya can pump, cartel delegates said. Due to internal political unrest, the two countries have been exempt from OPEC's production cut deal, which has been extended through to next March. The production limits could be voted on again when the organization meets on Nov. 30 in Vienna.

But the oversupply threat is so severe, mere talk of supply caps there hasn't been enough to change momentum, Mr. Navy said. Libya's crude-oil output has surged to more than one million barrels a day, up from 400,000 in October, while Nigeria's output has risen to 1.6 million barrels a day, up from 200,000 barrels a day in October, according to JBC, a Vienna-based energy-industry consultancy.

"This continues to be a market which sanctifies the negative and rationalizes the positive," Bill Herbert, analyst at Piper Jaffray Cos.' Simmons & Co. International, wrote in a note to clients Monday morning.

Gasoline futures recently lost 0.3% to $1.4945 a gallon. Diesel futures lost 0.4% to $1.4423 a gallon.

--Justin Yang and Biman Mukherji contributed to this article.

Write to Timothy Puko at tim.puko@wsj.com

(END) Dow Jones Newswires

July 10, 2017 11:26 ET (15:26 GMT)