Oil Prices Maintain Late US Declines in Asian Trading
Oil prices remained lower in Asian trading Friday following a Thursday afternoon pullback in the U.S. more than reversed gains seen after crude inventories there fell more than expected.
Behind the subsequent decline was investors returning focus on rising production, with U.S. average daily output last week hitting its highest level since August 2015.
"Supply-side concern is still very strong," said Vivek Dhar, commodities strategist at Commonwealth Bank of Australia.
On the New York Mercantile Exchange, U.S. crude futures for delivery in July were recently down 0.6% at $48.07 a barrel in the Globex electronic session. August Brent, the global benchmark, eased 0.5% from Thursday's settlement to $50.39 on ICE Futures Europe. Both have fallen more than 3% this week, adding to the selloff seen a week ago following the agreement to extend output cuts which are being led by the Organization of the Petroleum Exporting Countries.
As those locales cap their production, analysts see U.S. crude output continuing to trend higher as long as global prices stay above $40, a threshold at which many large U.S. oil companies can produce at a profit.
Rebounding output out of Libya has also been weighing on crude prices of late. While an OPEC member, it's exempt from the production agreement as local fighting has curtailed activity there in recent years. But developments of late have allowed the country's oil output to reach its best level in more than two years.
Some analysts, though, consider the Libya factor mainly a psychological one because the recent output increase there only equals about 1% of OPEC's overall daily production. "Moreover, further increases in Libyan oil production may see some political obstacles," said OCBC economist Barnabas Gan.
While OPEC's stated aim behind the production caps is to get global inventories back down to their 5-year average, little progress has been made on that front since the output reductions went into effect in January. Meanwhile, market players are monitoring any meaningful decrease in cartel members' crude exports. Declines in those are "the only way to have a significant impact in tightening the market," said Mr. Dhar.
As for refined products, Nymex gasoline futures for July were recently down 0.7% at $1.59 a gallon, diesel eased 0.4% to $1.4965 and June gasoil slid 1.6% to $443.25 a metric ton.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
June 01, 2017 23:25 ET (03:25 GMT)