Oil Edges Up as Investors Cash Out for Weekend
Oil prices rebounded on Friday as traders appear to be closing out a recent raft of bearish bets.
Both the trading week and month end Friday, and the contracts for both gasoline and diesel expire, all benchmarks that can dominate trade, analysts said. Those oil markets have all had at most just two winning sessions in the past two weeks, and many of the traders who sold contracts during that time are likely to want to close out those positions to square their trading books, analysts said.
Light, sweet crude for June delivery recently gained 5 cents, or 0.1%, to $49.02 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 4 cents, or 0.1%, to $51.48 a barrel on ICE Futures Europe. Both contracts had been down in seven of the last nine sessions through Thursday.
"There's been such a consecutive down streak...you are potentially oversold," said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. He added that many traders will be extra sensitive to weekends and expirations now because the next meeting of the Organization of the Petroleum Exporting Countries is now just weeks away, potentially creating market-moving headlines.
The market lately has been dominated by OPEC. It agreed with other big global exporters to curtail global production by about 1.8 million barrels a day. Although crude stocks have fallen, the initial price rally after the deal has been tempered by uncertainty over whether OPEC will decide to extend the cuts at its next meeting on May 25.
Analysts predict the oil cartel will exhibit unity to reassure the market.
"I think at least you are going to see a coordinated message that they are not going to flood the market with oil," said Bjarne Schieldrop, the chief commodities analyst at SEB Markets. "And, maybe, they will come out with some cuts, but not as much as in the first half."
Some cartel members have come out with potentially worrying statements about the conditions they require for OPEC's supply action to be extended.
Iraq Oil Minister Jabbar al-Luaibi has said his country wants to be able to produce more, while "Iran is demanding that it be allowed to 'significantly' increase its oil production," according to Commerzbank.
However, Tehran is already producing close to its maximum capacity of 4 million barrels a day, analysts say.
Meanwhile, rebounding U.S. oil output means crude prices could remain range-bound a bit longer.
"We don't expect prices to rise too much before the OPEC meeting next month," said Daniel Hynes, commodities analyst at ANZ Bank.
But if the output ceiling is extending, oil could move back toward $55 and possibly reach $60 a barrel in the second half of 2017, he added.
Next on the docket for market watchers is the weekly reading of active U.S. drilling rigs, due later Friday from Baker Hughes Inc.
Gasoline futures recently fell 0.1% to $1.5485 a gallon and diesel futures gained 0.7% to $1.4969 a gallon.
Write to Neanda Salvaterra at neanda.salvaterra@wsj.com, Timothy Puko at tim.puko@wsj.com and Biman Mukherji at biman.mukherji@wsj.com
(END) Dow Jones Newswires
April 28, 2017 12:39 ET (16:39 GMT)