Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
[Jessica Summers, Bloomberg]
Oil traded near $48 a barrel as diplomatic efforts to resolve a clash between Qatar and Saudi Arabia played out ahead of the release of industry-funded data on U.S. inventories.
Kuwait’s ruler will travel to Saudi Arabia on Tuesday to mediate an end to the feud between Qatar and a Saudi-led alliance, which accuses the Gulf state of terrorism links. Meanwhile, a Bloomberg survey found that U.S. crude inventories probably dropped by 3 million barrels last week, creating impetus for higher prices.
“The rumors that this could somehow disrupt the OPEC production deal obviously were overplayed,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone. The rally came as investors expect a drop in U.S. crude inventories, pushing them out of short positions, he said.
Oil has traded below $50 a barrel in New York since the Organization of Petroleum Exporting Countries and its partners agreed to extend output cuts into 2018 amid speculation that despite the curbs, a supply glut will persist. While American stockpiles have recently edged lower, output from the country has expanded to the highest since August 2015.
U.S. crude inventories probably declined for a ninth straight week, according to a Bloomberg survey before the release of data from the Energy Information Administration on Wednesday. Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, probably decreased by 750,000 barrels, according to a forecast compiled by Bloomberg.
West Texas Intermediate for July delivery rose 56 cents to $47.96 a barrel at 12:28 p.m. on the New York Mercantile Exchange. Total volume traded was about 23 percent above the 100-day average. The contract fell 26 cents to $47.40 on Monday, the lowest close since May 10.
Brent for August settlement climbed 36 cents to $49.83 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $1.76 to WTI for the same month.
Qatar is committed to the global oil-cuts deal, with a compliance rate of 93 percent to 102 percent, Kuwait’s Oil Minister Issam Almarzooq told official news agency KUNA.
Saudi Arabia port authorities say no vessels will be allowed coming from or going to Qatar, regardless of flag or owner nationality, Inchcape Shipping Services said on its website. The Saudi ban on vessels going to and from Qatar will create logistical difficulties for some combination charters of crude oil supertankers from the Persian Gulf and will likely increase the use of smaller vessels, according to Per Mansson, a shipbroker at Affinity Shipping in London.
- The EIA raised its U.S. crude output forecast for this year to 9.33 million barrels a day, according to its Short-Term Energy Outlook released Tuesday. It also increased its estimate for 2018 to 10.01 million barrels a day, exceeding the previous record level of 9.6 million barrels a day set in 1970.
- The U.S. last imported crude from Qatar in October 2011 when 515,000 barrels were delivered into the U.S. Gulf, according to EIA data going back to 1995.
- Barclays Plc cut its fourth quarter Brent forecast to $50 a barrel from $54, and its first quarter 2018 forecast to $51 on a “weak fundamental outlook,” head of energy markets research Michael Cohen says in report.
- Nigeria’s crude output increased to 1.59 million barrels a day in May from 1.45 million barrels a day in April, according to the ministry.
- Norwegian oil workers will hold wage talks with their employers on Friday in an attempt to avoid a strike that could cut 10 percent of crude output from western Europe’s largest producer.
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