Crude prices started the week higher in Asia following last week's near-4% skid, but market sentiment remains downbeat as supply pressures persist.
Last week saw volatile trading: Oil rose nearly 2% early on amid renewed diplomatic spats in the Middle East, then sank 5% on Wednesday as U.S. crude inventories surprisingly grew the week before. With there being no broad themes to trade at the moment, "people now tend to look at the short-term data points," said Danny Huang, lead analyst for China commodities at S&P Global.
He also doesn't expect prices to break out of their current range, with production cuts spearheaded by the Organization of the Petroleum Exporting Countries seen being offset by still-increasing output from the U.S.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in July were recently up 0.4% at $46.01 a barrel in the Globex electronic session. August Brent on London's ICE Futures exchange rose 0.4% to $48.34.
Rising oil-digging activities outside of OPEC, particularly the U.S., prompted UBS last week to cut its 2017 price forecast for WTI oil to $53 a barrel from $55.50. "U.S. shale players are clearly focused on delivering production growth, and plentiful capital is available to fund it," said Jon Rigby, the bank's head of oil research.
A net eight additional oil rigs were in operation in the U.S. last week, putting the figure at 741, the most since April 2015.
Meanwhile, faster-than-expected production rebounds in Libya and Nigeria--two OPEC nations exempt from the current cutback agreement--also stand to increase supply pressures on a still-bloated market.
Moreover, even though cartel members last month agreed to extend the pact to March next year, the worries is that some OPEC members are getting jittery and possibly cheating. Bernstein Research said tanker-tracking data suggest compliance to the production-cut deal is likely below the above-100% level seen as of April while reductions in crude exports have been smaller than anticipated.
OPEC's May report, which includes production and export figures, will be released Tuesday.
In addition, "The other reason to question the cuts is that oil inventories have increased, rather than decreased," noted Bernstein. Crude stockpiles in developed nations increased 40 million barrels in the first quarter. "The bottom line is that if OPEC are going to successfully defend price, they need to be doing more than they are doing today."
For oil products, July Nymex reformulated gasoline blendstock--the benchmark gasoline contract--gained 0.3% to $1.5055 a gallon while diesel was recently up 0.4% at $1.47. ICE gasoil added 0.2% to $427.75 a metric ton.
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(END) Dow Jones Newswires
June 11, 2017 23:29 ET (03:29 GMT)