Oil edges above November
lows but under threat from U.S. supply surge
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[June 26, 2017]
By Amanda Cooper
LONDON (Reuters) - Oil rose for a third
straight session on Monday, as speculators took advantage of last week's
drop to seven-month lows, although a relentless increase in U.S. supply
and little evidence of a widespread drop in global inventories capped
gains.
Investors in U.S. crude futures and options have increased their bets
against a further rise in prices, just as the number of U.S. oil rigs in
operation hit its highest in over three years. [CFTC/] [RIG/U]
U.S. shale oil output is up around 10 percent since last year, and,
together with increases from the likes of Brazil, threatens to scupper
the efforts of the Organization of the Petroleum Exporting Countries and
its partners to force a drawdown in global oil inventories via
production cuts.
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Brent crude futures were up 48 cents at $46.02 per barrel by 0836 GMT.
The price is still on track for a near 20 percent drop in the first half
of the year, having hit a trough of $44.35 on June 21, its lowest since
November.
U.S. West Texas Intermediate crude futures were up 47 cents at $43.48
per barrel.
"We saw this continued big rise in oil rigs last week and in our view we
don’t need a single additional rig for the next 12 months in the U.S.
space if we look at balance for 2018," SEB strategist Bjarne Schieldrop
said.
"I don’t think OPEC is going to cut deeper, at least not for now. I
think it’s keeping its fingers crossed and looking forward to Q3 and Q4
and hoping their medicine will do the trick."
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![](../images/062617pics/busine37.jpg)
An oil rig drilling a well at sunrise, owned by Parsley Energy Inc.
near Midland, Texas, U.S., May 3, 2017. Picture taken May 3, 2017.
REUTERS/Ernest Scheyder
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OPEC and 11 rival exporters agreed in May to extend a
1.8-million-barrels-per-day (bpd) cut in output to March 2018, in the hope that
it will force global supply and demand to align.
Traders and analysts said there was little fundamental news to justify more of a
bounce in oil prices.
"It is just the fact that the oil market stopped falling ... I suspect
short-covering," said Ric Spooner, chief market analyst at CMC Markets in
Sydney.
Analysts at Bank of America-Merrill Lynch said that while supply was a problem,
demand had not grown quickly enough to mop up any excess output.
"Looking into the second half of 2017, we now doubt that demand growth will
accelerate sufficiently," they wrote.
(Additional reporting by Jane Chung in SEOUL; Editing by Dale Hudson)
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