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Brent Down 2.4%
Brent Down 2.4%

Brent Down 2.4%

Brent Down 2.4%

Oil futures fell more than 2% on Friday, ending Brent crude’s longest multi-week rally in 16 months as oversupply concerns reappeared as producers have started hedging future drilling. Brent futures fell 2.4%, or $1.38 a barrel, to $55.62, snapping a five-week winning streak that was the longest since June 2016. For the week, Brent lost 3.3%. US West Texas Intermediate crude dropped $1.50 to $49.29, a 3% decline, putting losses on the week at 4.6%.
Russia clarified remarks made by President Vladimir Putin about the oil market earlier this week, saying he did not propose extending a global oil output cut deal but said he recognized it was a possibility, Reuters reported.
“Yesterday we had Russia and the Saudis talking about extending cooperation, and today we saw a little bit of backtracking with respect to additional cuts in production.” said Houston-based consultant Andrew Lipow. “What the market gained yesterday is clearly being given back today.”
The prospect of extended oil production cuts by the Organization of Petroleum Exporting Countries and other producers led by Russia had supported prices in recent sessions. Saudi Arabia’s Energy Minister Khalid Al-Falih said on Thursday he was “flexible” about prolonging the production-curbing pact until the end of 2018. However, concerns linger about growing US crude exports, due to a hefty WTI discount to Brent prices, which makes US oil more competitive.
US crude exports’ rise to a record of nearly 2 million barrels per day last week and the growth in US production to 9.56 million bpd has fanned some concerns about oversupply. Producer hedging has picked up as oil hit $50 a barrel, according to Bank of America analysts, who said that if producers keep boosting hedging, “they can limit the sensitivity of production to spot prices and continue to increase output in 2018”.
BofA noted that about 115 million barrels have been hedged since late August after lower-than-usual volumes of hedging in the early part of the year.
The Baker Hughes’ report on the US oil drilling rigs, an early indicator of future output, showed the rig count fall in for the fourth week out of the last five.

 

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