Oil Prices Inch Higher as Bullish Sentiment Remains

By Amrith Ramkumar and Neanda Salvaterra Features Dow Jones Newswires

Oil prices swung between small gains and losses Friday, as investors reacted to the latest data measuring U.S. production.

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Light, sweet crude for November delivery closed up 11 cents, or 0.2%, to $51.67 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, finished up 0.2% at $57.54.

U.S. crude prices rose 9.4% this month -- their best month since April 2016 -- supported by renewed faith in the efforts of Organization of the Petroleum Exporting Countries and other producers to alleviate a global supply glut and concerns that the recent Kurdish referendum could hit supply. U.S. demand has also been strong, with refineries ramping up operations following Hurricane Harvey.

On Friday, a monthly EIA report showed U.S. oil output in July was 9.2 million barrels a day, up slightly from 9.1 million barrels in June but below the weekly output numbers that pointed to a 9.4 million barrel a day figure in July. Some analysts have said recent monthly figures coming in under weekly estimates raise questions about whether future output can meet the EIA's supply forecasts.

"It fits the narrative for the bulls saying that U.S. shale is not as robust as the bears make it out to be," said Stephen Schork, author of the Schork Report.

Still, some analysts and investors have been concerned that U.S. producers continuing to increase output and possibly ramping up even more quickly to take advantage of higher prices could limit oil's upside.

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Also Friday, data was released by oil-field services company Baker Hughes showing that the number of active oil rigs in the U.S. climbed for the first time in seven weeks, a possible sign that higher prices are encouraging more drilling activity.

"That $55-$60 range [for Brent] has consistently been the ceiling," Mr. Schork said. "I would venture to say that's going to be the case moving forward for the foreseeable future," he said.

Traders are also closely monitoring the latest OPEC signals.

OPEC said commercial inventories have fallen by nearly half of the target since the beginning of 2017, which leaves "only another 170 million barrels to go," JBC analysts said in a recent report. However, OPEC's crude production rose by about 150,000 barrels a day in September, with Libya and Nigeria pumping extra barrels, JBC said. Heavy production from the two OPEC members exempted from the production curbs has been a concern for the cartel and allies in the production caps.

Investors are still evaluating the aftermath of the recent Kurdish referendum, in which voters overwhelmingly cast their ballot in favor of independence from Iraq. The vote result may trigger a hostile response from Iraq's central government, as well as from neighboring countries, and disrupt the flow of as much as 500,000 barrels a day of Kurdish oil exported through a Turkish port.

The Kurdish referendum has also rankled Iran and Turkey, as both have Kurdish minorities and fear the referendum could bolster claims for autonomy by militant Kurdish separatists in their regions. Turkish President Recep Erdogan has threatened to block Kurdish oil exports transiting through his country's territory.

"It is important to look at what Erdogan does," said Helima Croft, chief commodities strategist for RBC Capital Markets. "If he is serious about this threat, then we will see higher prices."

Gasoline futures fell 1.6% to $1.6065 a gallon in their fourth straight session of losses and diesel futures shed 1.1% to $1.8117.

--Benoit Faucon contributed to this article.

Write to Neanda Salvaterra at neanda.salvaterra@wsj.com

(END) Dow Jones Newswires

September 29, 2017 15:53 ET (19:53 GMT)