Oil rebounds from one-month low

Oil prices edged up on Thursday, having hit one-month lows the previous day after an unexpected surge in US inventories and the return of more Nigerian crude to an already over-supplied market.

The oil price has slipped below $50 a barrel despite a pledge by the world’s largest exporters to extend an existing output cut of 1.8-million barrels per day (bpd) into next year in an effort to reduce bulging global inventories.

Adding to concern about supply outstripping demand, on Wednesday, Royal Dutch Shell lifted force majeure on exports of Nigeria’s Forçados crude, bringing all the country’s oil grades fully online for the first time in 16 months.

Source: Bloomberg, BusinessDay

Brent crude was up 43c by 9am GMT at $48.49 a barrel, having fallen 4% the day before, while US crude futures rose 38c to $46.10 a barrel.

The market has also come under pressure from news of rising output from Libya which, together with Nigeria, is exempt from the production cut made by oil cartel OPEC and its 11 partners.

“I’ve been quite bullish for the second half of this year, based on supply and demand balances and I will still not give up on that idea, that re-balancing is going to start in the second half,” PVM Oil Associates strategist Tamas Varga said. “But if Nigerian and Libyan production picks up as well as they are now, then, slowly, I am probably going to have to start changing my mind.”

In the US, stocks of crude oil and gasoline surprisingly rose last week as refinery runs declined and exports fell, official data showed on Wednesday.

Nervousness also pervaded the broader financial markets. Former FBI director James Comey’s US congressional appearance, a European Central Bank (ECB) policy meeting and the British general election all take place on Thursday.

Many investors are wary ahead of Comey’s senate appearance as they look for any hints that US President Donald Trump might have engaged in obstruction of justice — an offence that could lead to impeachment hearings.

ECB policy-makers are set to take a more benign view of the economy and will even discuss dropping some of their pledges to ramp up stimulus if needed, sources with direct knowledge of the discussions told Reuters.

None of those events “are directly related to oil but all of them could have an impact on the dollar and risk attitudes generally”, said Ben Le Brun, market analyst at OptionsXpress in Sydney.

Reuters