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Oil prices edge up; still near 2017 lows on stubborn glut
[NEW YORK] Oil prices on Friday bounced up off the year's lows as some producers reduced exports and US rig additions slowed, but the rebound was modest and crude posted its fourth weekly decline on persistent concerns about global oversupply.
Brent crude futures rose 45 US cents to settle at US$47.37 per barrel and US West Texas Intermediate (WTI) crude settled at US$44.74 per barrel, up 28 US cents. Both benchmarks notched a weekly loss exceeding 1.6 per cent.
On Thursday, oil prices hit six-month lows. They are down more than 12 per cent from late May when producers led by the Organization of the Petroleum Exporting Countries extended a pledge to cut output by 1.8 million barrels per day (bpd) through March 2018.
"You're starting to get to the lower end of the range," said Rob Haworth, senior investment strategist at US Bank Wealth Management. He said that even bullish market watchers are accepting that prices are likely to remain lower for longer.
"You're starting to see some capitulation by investors because the data isn't going as they hoped," Mr Haworth said.
Kazakhstan, which agreed to cut supplies last year as part of the non-Opec bloc, said it would reduce production in June and July after overproducing for three months in a row.
But Opec members Nigeria and Libya, which are exempt from the deal, have increased exports as they bounce back from supply disruptions caused by protests, rebel activity and mismanagement.
In the latest sign of a crude glut, aging supertankers are being used to store unsold oil off Singapore and Malaysia.
Rising US crude output has undermined Opec-led cuts, with production up more than 10 per cent in the past year. US Energy Information Administration (EIA) data this week showed growing gasoline stocks and shaky demand.
US energy companies added oil rigs for a record 22nd week in a row, energy services company Baker Hughes said on Friday.
Still the pace of additions has slowed in recent months, and lower prices could test shale's resiliency.
"I think there's evidence that we're starting to see reactions by shale producers," said US Bank Wealth Management's Haworth, "New investments are slowing down."
Eight prominent hedge funds have reduced the size of their positions in 10 of the top shale firms in the Permian, the largest US oilfield, by over US$400 million, concerned that producers are pumping oil so fast they will undo the recovery.