Oil loses gains

Picture: Hasan Jamali

Picture: Hasan Jamali

Published Sep 4, 2015

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New York - Oil pared a second weekly advance before US employment data amid signs of a persisting global surplus.

Futures fell 0.6 percent in New York, curbing their gain for the week to 2.7 percent. The world’s crude surplus will last longer than predicted, Societe Generale estimated this week. The August nonfarm-payrolls report Friday may add fuel to the debate over whether the US economy is strong enough for the Federal Reserve’s first interest-rate increase since 2006. A rates increase could support the dollar, making commodities less attractive to investors.

Oil has fluctuated after capping the biggest three-day rally in 25 years on Monday. Crude is still down more than 20 percent from this year’s closing peak in June as leading members of the Organisation of Petroleum Exporting Countries sustain output and US crude stockpiles remain almost 100 million barrels above the five-year seasonal average.

“The market remains in an unsteady state as it tests new equilibrium levels and comes to terms with a persistent supply overhang,” Barclays analysts including Miswin Mahesh and Michael Cohen said in a report.

West Texas Intermediate for October delivery fell as much as 95 cents to $45.80 a barrel on the New York Mercantile Exchange and was at $46.45 at 9:50 a.m. in London. The contract gained 50 cents, or 1.1 percent, to $46.75 on Thursday.

Price pact

Brent for October settlement slipped 20 cents to $50.48 a barrel on the London-based ICE Futures Europe exchange. It advanced 18 cents to $50.68 on Thursday. The European benchmark crude traded at a premium of $4.04 to WTI.

Friday’s nonfarm payrolls report represents the last major data point before the Fed meets on September 16-17.

OPEC member Venezuela and Russia, the largest oil exporter outside the group, reached an agreement on “initiatives” to bring stability to the market, Venezuelan President Nicolas Maduro said, according to Venezuela’s state-run news agency AVN. Russian President Vladimir Putin and his Venezuelan counterpart “have agreed on some initiatives that will be known when put in place, to achieve stability of the oil market,” Maduro said Thursday after a meeting in China.

Crude stockpiles

Still, cutting output for a short-term gain in prices wouldn’t remedy the “sickness’’ affecting global markets, Russian Energy Minister Alexander Novak told reporters in Vladivostok on Friday.

Crude stockpiles in the US, the world’s biggest oil consumer, expanded by 4.67 million barrels to 455.4 million through August 28, according to an Energy Information Administration report on Wednesday. Output declined for a fourth week to 9.22 million barrels a day, the EIA said.

Prices will be lower for longer amid high OPEC output led by Saudi Arabia and Iraq, and the gradual return of Iranian supply next year, Michael Wittner, the New York-based head of oil market research at Societe Generale, said in a report earlier this week.

Still, “the world, whilst moderately oversupplied, is not awash in oil,” Andy Hall, one of the best-known oil traders who runs hedge fund firm Astenbeck Capital Management, said in a letter to investors. US crude output through the remainder of 2015 will decline 6 percent from the first half’s average, said Hall, who added that he expects to see a decline in production forecasts by the International Energy Agency.

Nineteen of 44 analysts and traders, or 43 percent, were bearish on WTI in a Bloomberg survey through Thursday. Thirteen respondents were neutral while 12 were bullish.

BLOOMBERG

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