Oil futures were little changed in late-morning Asian trading, clawing back earlier declines, amid a variety of market impacts including a rising dollar as returns from the U.K election came in and concerns the ongoing concerted effort by Middle Eastern and Russian producers to reduce global stockpiles is floundering.
Amid a slump in the pound as signs are Britain's ruling Conservatives won't keep its majority in parliament, the WSJ Dollar Index was recently up 0.3%. As oil trading is conducted in dollars, a stronger U.S. currency makes oil more expensive for foreign traders.
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While the dollar strength initially sent crude futures lower, some buyers came into the market and analysts say the election outcome won't ultimately have a direct and immediate impact on oil trading.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in July recently traded down 4 cents at $45.60 a barrel in the Globex electronic session while August Brent crude on London's ICE Futures exchange fell 2 cents to $47.84. Both have slid some 4% this week amid Wednesday's slump amid a surprise increase last week in U.S. oil inventories.
Supplies remains the market's key concern. Data show although most members of the Organization of the Petroleum Exporting Countries and some non-cartel producers have been abiding by pledges to cut production, global crude inventories levels remain above 5-year averages.
Energy Aspects says the cartel must also cut exports, in addition to output, to reduce the global glut amid record U.S. exports. Recovering production out of Nigeria and Libya, the two OPEC members exempt from the cutback deal, is also a negative.
Still, many see U.S. shale producers as the main culprit for keeping the oil market amply oversupplied. The number of active U.S. oil-drilling rigs there have risen for 20 straight weeks, says oilfield-service company Baker Hughes. Its weekly report is due later Friday.
But some market watchers say last week's slight decrease in average daily U.S. oil output could be an indication that some high-cost producers are feeling the heat as prices have averaged below $50 a barrel since April. "The decreased production shows we are probably closer to a floor," said Michael McCarthy, a CMC Markets analyst. Meanwhile, oil-exploration costs are rising overall after slumping amid the 2014-2015 plunge in crude prices.
One silver lining has been Asian demand, in particular China. Crude imports by the world's second biggest economy notched their second-highest level in May. Meanwhile, India's oil demand for April was the highest since November.
Among oil products, Nymex reformulated gasoline blendstock--the benchmark gasoline contract--were recently down 0.2% at $1.4886 a gallon while ICE gasoil edged up 0.1% to $422.25 a metric ton.
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(END) Dow Jones Newswires
June 08, 2017 23:17 ET (03:17 GMT)