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Oil extends gains to sixth day on dip in US output
[NEW YORK] Oil futures ended slightly higher on Thursday, extending crude's rally to a sixth straight session after a decline in weekly US crude production temporarily eased concerns about deepening oversupply.
US crude futures settled up 19 cents at US$44.93 a barrel after hitting a two-week high of US$45.45 in late-morning trading. The market retreated from highs after Societe Generale became the third investment bank to cut its outlook for oil prices in the last week.
Crude prices hit a 10-month low last week but have rebounded more than 5 per cent, stretching their bull run to the longest since April. Brent crude futures ended up 11 cents at US$47.42 a barrel, after touching a two-week high of US$48.03 earlier in the session.
"After the steep drop in oil prices of recent weeks, I believe that especially hedge funds saw nice buying momentum and lower US crude production was the trigger to act," said Hans van Cleef, senior energy economist at ABN Amro.
Analysts were not sure whether bearish sentiment had abated in the oil market, given larger-than-usual inventories in the United States for both crude oil and key products like gasoline.
"It does feel as if a wave of selling has ebbed for now," wrote analysts at Credit Suisse. They added, however, that the rebound in prices reflected technical buying rather than a change in fundamentals.
In recent weeks, funds have been unloading long speculative positions, reducing bets on higher prices while brokerages including Goldman Sachs and Societe Generale have cut their 2017 forecasts for crude prices.
SocGen on Thursday estimated US crude futures would average US$47.50 a barrel in the third quarter, down from previous expectations for US$55.
US crude production dropped 100,000 barrels per day (bpd) to 9.3 million bpd last week, the steepest weekly fall since July 2016. But analysts said the decline was related to temporary factors, including production shut as a precaution in the Gulf of Mexico due to Tropical Storm Cindy, along with maintenance in Alaska.
Global oil supplies remain ample despite output cuts of 1.8 million bpd by the Organization of the Petroleum Exporting Countries and other producers since January.
Opec and its allies, trying to reduce a crude glut, agreed in May to extend the supply cut through March 2018. Opec has exempted Nigeria and Libya from the curbs, leaving them free to ramp up output that had been sapped by local unrest.
"That's going to increase pressure on Opec cuts," said Tony Scott, managing director of analytics at BTU Analytics in Denver.
"As long as Libya and Nigeria can remain stable - Libya has ramped up several times over last couple of years and then the violence has come back."
Libyan oil production is nearing 1 million bpd, a Libyan source with direct knowledge of the matter told Reuters.
Royal Dutch Shell on Wednesday lifted force majeure on Nigerian Bonny Light crude exports after pipeline repairs.