Oil prices steady as US crude inventories indicate tighter market

Andrew Cummings
October 10, 2017

Thanks to the advent of the 4th hurricane of the season, oil prices fell Friday in the USA as the gulf coast awaited the arrival of a storm named Nate. United States oil output rose by 14,000 barrels a day to 9.56 million a day last week, according to data from the Energy Information Administration.

"It depends on collective decision and consensus within OPEC, but I think there is no objection against this proposal", Zanganeh noted.

The Organization of the Petroleum Exporting Countries is due to meet in Vienna on November 30, when it will discuss its pact to reduce output in order to prop up the market. That's 1.61 million barrels per day of oil and 2.48 billion cubic feet per day of natural gas, the US Bureau of Safety and Environmental Enforcement said.

"Higher Opec production in September as well as the prompt return of supplies from Libya after the brief closure of their biggest field weighed on oil futures this week", said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.

Crude oil futures tumbled Friday, logging the worst weeky performance in more than a month despite industry data showing a surprise drop in the U.S. rig count.

U.S. West Texas Intermediate (WTI) crude was trading at $50.63 per barrel at 0650 GMT, down 16 cents from its last close. Earlier in the day, they fell as low as $55.38.

While Brent futures have moved into backwardation, indicating a tightening market, WTI prices began to diverge from late July and have remained in contango.

Among other bullish news for oil, Morgan Stanley cut its forecast for US crude output growth, citing a range of operational headwinds including limited availability of fracking crews.

Venezuelan President Nicolas Maduro on Sunday stressed the need for a "new formula" to fix crude prices, expressing hopes that the measure could be adopted at the next summit of the Organization of Petroleum Exporting Countries (OPEC).

"Higher U.S. exports are likely to encourage U.S. shale producers to further increase production, which will delay market rebalancing", Capital Economics said in a note.

"The market is rebalancing with the OPEC/non-OPEC (mainly Russia) agreement to cut production, rise in demand, and consequent inventory draw-down, but this is happening slowly", he said.

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