Oil Prices Turn Positive After Bullish Report

Oil prices turned positive Friday after U.S. Energy Information Administration data was released showing crude production in July was below what weekly output numbers had previously indicated.

Light, sweet crude for November delivery edged up 5 cents, or 0.1%, to $51.60 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, swung between small gains and losses and was recently down less than 0.1%, at $57.38.

The EIA monthly report said U.S. oil output in July was 9.2 million barrels a day, up slightly from June but below the weekly output numbers that pointed to a 9.4 million barrels a day figure in July. Some analysts have said recent monthly figures coming in under weekly estimates raises questions about whether future output can meet the EIA's forecasts.

"It fits the narrative for the bulls saying that U.S. shale is not as robust as the bears make it out to be," said Stephen Schork, author of The Schork Report.

Some analysts and investors have been concerned that U.S. producers continuing to increase output and possibly ramping up even more quickly to take advantage of higher prices could limit oil's upside.

Prices have risen roughly 9% this month, supported by renewed faith in the efforts of Organization of the Petroleum Exporting Countries and other producers to alleviate a global supply glut and concerns that the recent Kurdish referendum could hit supply. U.S. demand has also been strong, with refineries ramping up operations following Hurricane Harvey.

Still, doubts about OPEC's ability to keep production down and future U.S. production remain.

"That $55-$60 range [for Brent] has consistently been the ceiling," Mr. Schork said. "I would venture to say that's going to the case moving forward for the foreseeable future," he said.

OPEC said commercial inventories have fallen by nearly half of the target since the beginning of 2017, which leaves "only another 170 million barrels to go," JBC analysts said in a recent report. However, OPEC's crude production rose by about 150,000 barrels a day in September, with Libya and Nigeria pumping extra barrels, JBC said. Heavy production from the two OPEC members exempted from the production curbs has been a concern for the cartel and allies in the production caps.

Investors are still evaluating the aftermath of the recent Kurdish referendum, in which voters overwhelmingly cast their ballot in favor of independence from Iraq. The vote result may trigger a hostile response from Iraq's central government, as well as from neighboring countries, and disrupt the flow of as much as 500,000 barrels a day of Kurdish oil exported through a Turkish port.

The Kurdish referendum has also rankled Iran and Turkey, as both have Kurdish minorities and fear the referendum could bolster claims for autonomy by militant Kurdish separatists in their regions.

Turkish president Recep Tayyip Erdogan has threatened to block Kurdish oil exports transiting through his country's territory. Investors will be watching for what Ankara says moving forward.

"It is important to look at what Erdogan does," said Helima Croft, chief commodities strategist for RBC Capital Markets. "If he is serious about this threat, then we will see higher prices."

Gasoline futures fell 1.4%, to $1.6092 a gallon, and diesel futures shed 0.8%, to $1.8883. Gasoline was on track to extend a three-session losing streak.

--Benoit Faucon contributed to this article.

Write to Neanda Salvaterra at neanda.salvaterra@wsj.com

(END) Dow Jones Newswires

September 29, 2017 13:53 ET (17:53 GMT)