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Oil rebounds but ends week lower as Opec cuts disappoint
[NEW YORK] Oil prices rebounded to rise more than 1 per cent on Friday, but Brent crude ended the week nearly 3 per cent lower after an opec-led decision to extend production curbs did not go as far as many investors had hoped.
Trading was light after Thursday's heavy sell-off and ahead of the long weekend break in the United States and Britain.
Brent futures settled up 69 cents to US$52.15 a barrel, or 1.3 per cent, after hitting a session low of US$50.71.
US West Texas Intermediate (WTI) crude futures settled at US$49.80 a barrel, gaining 90 cents or 1.8 per cent, after hitting an intra-day low at US$48.18.
On Thursday, the Organization of the Petroleum Exporting Countries and other producers pledged to continue output cuts of 1.8 million barrels per day (bpd) for another nine months, through the first quarter of 2018.
Crude prices plunged 5 per cent after the decision as some had priced in more aggressive output cuts.
"I think it was kind of a knee jerk reaction, I don't think it was anything meaningful," said Antoine Halff, director of the global oil programme at Columbia University.
CFTC data showed that in the week ahead of the Opec meeting, hedge funds raised bullish bets on US crude for the first time in five weeks. A majority of the increase came from gross short positions being liquidated.
Volumes for Brent were down to 254,142 from Thursday's 464,495, while WTI volumes fell to 726,467 from 1.15 million trades, which was the highest since Nov 30 when Opec first agreed to the cuts.
For the week, Brent oil futures were 2.7 per cent lower and WTI declined 1.1 per cent.
Producers have expressed confidence that the Opec-led plan will bring down crude stocks to their five-year average of 2.7 billion barrels.
But US crude production has risen 10 per cent since mid-2016 to over 9.3 million bpd, close to the output of top producers Russia and Saudi Arabia.
US energy firms added oil rigs for a record 19 weeks in a row but the pace of additions has slowed with only two added this week, and the monthly total added was the lowest since October, according to Baker Hughes data.
With US output rising steadily and fears that Opec and others could raise production in 2018 to regain lost market share, many traders, including Goldman Sachs, already expect another price slump.
Many in the oil market are hopeful that gasoline demand will strengthen as the US summer driving season begins this weekend ahead of the Memorial Day holiday on Monday. The number of Americans on the road was forecast to hit a 12-year high due to a growing economy and relatively cheap fuel.
The American Automobile Association projected 34.6 million people will drive 80km or more from home during the holiday period, the most since 37.3 million in 2005.
"Hopefully driving season picks up," said James Williams, president of energy consultant WTRG Economics in London, Arkansas. "Hopefully the market is saved by the US driver this Memorial weekend."