Global oil prices are flip-flopping around unchanged Thursday, with traders divided about an unexpected addition to U.S. crude inventories last week and the prospects for a supply shortage in the months to come.
Light, sweet crude for July delivery recently gained 15 cents, or 0.3%, to $45.87 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 7 cents, or 0.2%, to $48.13 a barrel on ICE Futures Europe.
Prices are recovering slightly from a drop Wednesday that was their steepest in three months and took oil prices to around their lowest points since November. Many traders want to close out bearish bets to take profits after a fall like that, which can raise prices as they buy back contracts they had sold, analysts and a trader said.
There may be some others who see a bargain and buy on expectations a shortage is still coming later this year, Tim Evans, analyst at Citi Futures Perspective in New York, said in a note. It could be about 700,000 barrels a day starting in the third quarter, he said.
"As the shock over the data fades and the market begins to face forward again, we think the focus will shift to the projected (summer) supply demand deficit," he added.
Oil prices sank on Wednesday after the Energy Information Administration said U.S. crude stocks rose 3.3 million barrels last week, deepening concerns that the continuing production cuts by the Organization of the Petroleum Exporting Countries and Russia aren't effectively reducing the glut of oil that has suppressed prices for over two years.
"There is some general doubt regarding the success of OPEC," said Olivier Jakob at Switzerland-based consultancy Petromatrix. Mr. Jakob said that this is usually the tightest time of year in terms of strong demand, along with lower supply from Saudi Arabia due to seasonal factors, therefore U.S. stocks weren't expected to build.
One problem for OPEC is that their announcement last year initially led prices above $50 a barrel, which benefited U.S. shale producers, who are aggressively expanding their operations and raising their oil exports. Though last week's daily crude production ebbed from the previous week, when it reached the highest level since August 2015, it remained above 9.3 million barrels.
"Oil prices are likely to remain range bound with OPEC providing support for prices and U.S. production growth limiting potential price gains," said Rob Haworth, investment strategist at U.S. Bank Wealth Management.
Gasoline futures recently gained 0.3% to $1.4951 a gallon, and diesel futures were up 0.8% at $1.4273 a gallon.
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(END) Dow Jones Newswires
June 08, 2017 12:28 ET (16:28 GMT)