Oil is poised for a sixth weekly loss, trading near $57 a barrel as lingering concerns over a supply glut continue to weigh on the market.
Futures in New York rose 1.1% on Friday, trimming the weekly drop to 5.2%. Government data on Thursday showed American crude inventories rose the most in 21 months last week as output hit a record high. With the Organization of Petroleum Exporting Countries seeing declining demand for its oil, the group and its allies are said to be considering bigger-than-expected cuts despite criticism from US President Donald Trump.
Oil is in a bear market after plunging from a four-year high in October on concerns over a glut, following surprise American waivers allowing some Iranian oil flows to continue even after its sanctions against the Islamic Republic took effect. Meanwhile, the outlook for demand remains uncertain due to ongoing trade tensions between the US and China. And speculation is swirling over the output strategy of OPEC and its allies including Russia before they meet in Vienna in early December.
“It remains to be seen whether oil markets have bottomed out with a price slump coming to a pause” with various reports pointing to a loosening supply and demand balance, Jun Inoue, a senior economist at Mizuho Research Institute Ltd, said by phone from Tokyo. “The prospect of OPEC and allies cutting production and maintaining it for a certain period of time could increase as their December meeting approaches, supporting prices.”
West Texas Intermediate for December delivery traded 61 cents higher at $57.07 a barrel on the New York Mercantile Exchange at 16:53 in Tokyo. The contract advanced 21 cents to $56.46 on Thursday. Total volume traded was about 9% below the 100-day average.
Brent for January settlement rose $1 to $67.62 a barrel on the London-based ICE Futures Europe exchange. The contract has dropped 3.5% this week. The global benchmark crude traded at a $10.18 premium to WTI for the same month.
The dollar staying near an 18-month high has also reduced the appeal of commodities priced in the US currency.
As oil was mired in a record 12-day losing streak this month, Saudi Arabia proposed an output cut of 1 million barrels a day, a u-turn from a June decision to boost supply. People familiar with the matter said the reduction may be even bigger. Still, the effect on benchmark prices may be “muted,” according to Morgan Stanley, as the current glut is in light-sweet crude varieties, whereas OPEC would primarily be curbing medium and heavier grades.
Investors are also assessing signals from OPEC’s key ally, Russia. President Vladimir Putin said on Thursday an oil price of “around $70 suits us completely.” Energy Minister Alexander Novak also suggested earlier this week the country is in no rush to act immediately.
Meanwhile, rising US crude inventories have added to oversupply concerns. US stockpiles rose 10.27 million barrels last week, according to the Energy Information Administration, compared with expectations for a 3.2-million-barrel increase. Crude production edged higher to a record 11.7 million barrels.Other oil-market news: The US still plans to raise tariffs on Chinese imports in January with President Donald Trump and China’s Xi Jinping likely at best to agree to a “framework” for further talks to resolve trade tensions at an upcoming meeting, Commerce Secretary Wilbur Ross said. The Trump administration issued financial penalties against 17 top Saudi officials over the death of journalist Jamal Khashoggi hours after the kingdom charged 11 people for the murder. The energy industry and oil-producing countries need to prepare for a long period of cheap crude, and one in which prices won’t reach $100 a barrel again, due largely to the boom in US shale production, according to Chevron Corp.
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