Oil futures continued to climb higher in Asian trading as last week's drop in U.S. production stoked some hopes that the monthslong slide in prices is starting to take a toll on shale output there.
Analysts note it usually takes around two months for price actions to translate into actual changes in production. The daily average falling 100,000 barrels last week to 9.25 million, albeit minor and coming as a tropical storm resulted in some production shutdowns, could nonetheless be the harbinger of further output declines.
Continue Reading Below
"The low prices has finally spilled over to the production side and we believe production should fall further throughout the year," said OCBC economist Barnabas Gan.
After a further 1% rise overnight, putting oil's winning streak at five sessions, light, sweet crude futures on the New York Mercantile Exchange for delivery in August recently traded up 0.4% at $44.93 a barrel in the Globex electronic session. August Brent on London's ICE Futures exchange rose 0.3% to $47.47 a barrel. Both had fallen five straight weeks coming into this week.
The resiliency and the increasing efficiency demonstrated by U.S. producers has largely foiled the Organization of the Petroleum Exporting Countries' effort to lower global inventories. Since January, when the OPEC-Russia-led output curtailment began, oil prices have fallen 16% and the glut has remains unabated.
Some oil investors are banking on prolonged low oil prices to weed out less-competitive producers and bring the market to back to a balance. But that only happened on a limited basis after crude's price plunge to 13-year lows at the start of 2016.
But Wednesday's weekly report from the Energy Information Administration also had many bearish factors. For example, the general expectation was for a decline in U.S. crude supplies last week due to the severe weather in the Gulf of Mexico. Instead, they rose slightly. Consultancy Energy Aspects noted Tropical Storm Cindy "did not impact the discharge of imported crude," which rose 140,000 barrels last week.
"With the window of opportunity to draw down crude stocks over the summer closing, the market is already fretting about the upcoming refinery maintenance season," the firm said.
Moreover, despite the onset of U.S. driving season, gasoline demand in the last four-week period fell 2.7% from a year earlier while production of gasoline increased.
Societe Generale said last week's modest declines in U.S. gasoline and distillate supplies were insufficient to push a broader inventory measure lower, adding the report shows "no sign of rebalancing and nothing to indicate any change to the bearish status quo for the global oil markets."
Refined products were also broadly higher in Asian trading Thursday. Nymex reformulated gasoline blendstock was up 0.8% at $1.49 a gallon, July diesel ascended 0.6% to $1.44 and ICE gasoil gained 1% to $431.75 a metric ton.
Write to Jenny W. Hsu at email@example.com
(END) Dow Jones Newswires
June 28, 2017 22:57 ET (02:57 GMT)