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Seoul - Oil edged toward its second weekly increase as OPEC and its allies prepare to review their plan to clear a global glut that hasn’t worked as they hoped.
Futures in New York and London are up less than 50 cents this week, after rising more than $2 in the period ended July 14. Crude is struggling to hold on to gains before a gathering of the Organisation of Petroleum Exporting Countries and nations including Russia in St. Petersburg this weekend.
Their implementation of supply curbs to prop up prices is faltering as Libya and Nigeria - both exempt from their agreement - restore lost production.
OPEC and its partners are seen standing pat on their deal, in the absence of viable alternatives. Oil is already languishing in a bear market below $50 a barrel on concern that growing US output is offsetting the other producers’ curbs. A decision in St. Petersburg to deepen those cuts risks boosting American supply if prices rally. And abandoning the agreement could spur a further drop in oil.
“Unless OPEC and its partners decide to further cut output, which I highly doubt will happen, the upcoming meeting won’t have much impact on oil prices,” Will Yun, a commodities analyst at Hyundai, said by phone from Seoul.
While Libya and Nigeria have been invited to the St. Petersburg meeting, Yun doubts the group will place a cap on their production. “These countries aren’t doing too well, but will they sacrifice themselves for the sake of others in the group? I think it’s highly unlikely,” he said.
Supply draw
West Texas Intermediate for September delivery was at $46.94 a barrel on the New York Mercantile Exchange, up 2 cents, at 08:51. Total volume traded was about 40% below the 100-day average. The August contract expired on Thursday after losing 33c to $46.79. Front-month futures are up 40c this week.
Brent for September settlement was little changed at $49.34 a barrel on the London-based ICE Futures Europe exchange. The contract slipped 40c to $49.30 on Thursday. Prices are up 43c this week. The global benchmark crude traded at a premium of $2.38 to WTI.
OPEC and its allies are working to pare global stockpiles relative to the five-year average. Saudi Arabia’s crude inventories have reached the lowest level since January 2012 as the world’s biggest oil exporter kept a lid on production and US stockpiles have shown signs of decline. Still, the International Energy Agency said earlier this month that global supplies remain bloated.
Oil-market news:
Nigeria increased its crude exports by about 12% in May from a month earlier, the West African nation’s central bank said in a report. The operating rate at China’s independent refineries in the eastern Shandong province climbed to 59.21% of capacity in the week ended July 20, according to industry website Oilchem.net.
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