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Oil edges up as Saudis cut supplies to US, but global glut remains
[SINGAPORE] Oil prices edged up on Friday, supported by a fall in Saudi exports to the United States, but overall markets remained under pressure on the back of a world market awash with fuel.
Prices for front-month Brent crude futures, the international benchmark for oil, were at US$50.63 per barrel at 0343 GMT, up 7 US cents from their last close.
In the United States, West Texas Intermediate (WTI) crude futures were up 12 US cents at US$47.82 a barrel.
Traders said the lift in prices came as a report that Saudi Arabia's crude exports to the United States in March would fall by around 300,000 barrels per day (bpd) from February, in line with the Organization of the Petroleum Exporting Countries (Opec) agreement to reduce supply.
"We have turned bullish ... over a three-month time horizon ... on the premise of strong stock draws in Q2 2017 and firm Opec, non-Opec compliance," BMI Research said in a note to clients.
In the United States, overseas oil suppliers like Saudi Arabia have to compete against rising shale drilling, which has pushed up US oil production C-OUT-T-EIA by more than 8 per cent since mid-2016 to just above 9.1 million bpd.
To other major consumer regions, however, Saudi exports remain high despite an effort led by Opec, and supported by other producers including Russia, to cut output by 1.8 million bpd during the first half of the year to rein in a global supply.
Ship chartering and trading data in Thomson Reuters Eikon shows that Opec shipments to Asia, the world's biggest and fastest growing oil consuming region, were at 17.6 million bpd in March, up more than 5 per cent since January, when the cuts officially started, in a sign that Opec is shielding its main customers from the supply reductions.
Unless Opec extends the curbs beyond June or makes bigger cuts, traders say oil prices are at risk of falling further.
"The market is keen to see further progress on production cuts to alleviate the still growing stockpiles," ANZ bank said on Friday.
Dennis Gartman, founder and editor of the Gartman Letter said the longer term outlook was for ongoing low oil prices.
"This slump is very real ... Fracking has only just begun here in the US and it will be transferred swiftly to other countries abroad, so the supply of crude oil is going to increase rather dramatically in the years to come," he told the Reuters Global Markets Forum on Friday.
Despite the Opec-led cuts that began in January, Brent has fallen by nearly 11 per cent this year as other producers have stepped up and filled the gap.