Oil prices steady after five days of falling

Despite the slight increases, traders said sentiment was bearish given the drop in prices over the past five days

By: Reuters | Singapore | Published:November 4, 2016 11:11 am

Oil prices edged up on Friday, stabilising after five straight days of falls, although a surge in US crude inventories and doubts over the ability of producers to coordinate output cuts continued to keep a lid on the market. Brent crude was up 13 cents, or 0.28 percent, at $46.48 per barrel at 0515 GMT. US West Texas Intermediate (WTI) futures rose 11 cents, or 0.25 percent, to $44.77.

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Despite the slight increases, traders said sentiment was bearish given the drop in prices over the past five days – the longest losing run since June. Oil futures have shed more than 13 percent since their recent peak in mid-October.

“The persistent market dynamic of softer demand and stronger supply will become a more dominant driver of prices as the impact of OPEC’s verbal interventions begins to fade and expectations for coordinated cuts are readjusted,” BMI Research said in a note to clients.

“We see a trading range of $43-53 per barrel leading oil markets into the new year and we maintain our forecasts of an average 55 per barrel and $53.5 per barrel for Brent and WTI respectively for 2017,” it added.

Analysts said markets were also weighed down by traders pulling out money from futures ahead of the US presidential elections, which are seen as a risk to markets.

“I suspect the main drivers are that risk is being taken off the table ahead of next week’s election,” said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.

Beyond concerns ahead of the elections, traders said oil fundamentals were also weak, with US crude stocks surging, demand growth low, and doubts that the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producer Russia can agree on a meaningful output cut this month.

While oil production remains near records and inventories are high, British bank Barclays said demand growth was timid.

Demand growth over July-September was less than a third that of the year-ago quarter, Barclays said in a note, estimating last quarter’s growth below 1 million barrels per day (bpd).

Consumption rise for the last quarter will not be much higher, before averaging 1.3 million bpd in 2017, it added.

In the United States, crude oil stockpiles soared more than 14 million barrels last week, the largest build on record, highlighting that a global fuel supply overhang is far from over.

Also in the United States, the Colonial Pipeline carrying gasoline, which was disrupted this week by an explosion, is expected to restart Line 1 on Sunday afternoon.