Oil rally fizzles as prices made vulnerable

Seoul - Oil’s rally above $50 a barrel is running out of steam.

Futures in New York were holding losses after dropping 0.7% on Monday, following a 5.5% jump last week. While OPEC output fell by 200 000 barrels a day in March, the decline was helped by cuts in Nigeria and Libya that are exempt from its production-curb deal to shrink a global glut, a Bloomberg News survey shows.

Libya was said to resume pumping at its biggest field after about a week of disruption that had helped boost prices.

Oil’s climb last week, its most since December, was also aided after Kuwait and other producers from the Organisation of Petroleum Exporting Countries joined with Oman to voice support for an extension of the six-month deal to reduce output that began in January.

OPEC Secretary-General Mohammad Barkindo said on Sunday that he is “cautiously optimistic that the market is already rebalancing,” even as data showed the number of active oil rigs in the US rose to the highest since September 2015.

“Oil will continue to remain vulnerable as Libyan production recovery is expected to increase downward pressure on prices,” said Will Yun, a commodities analyst at Hyundai Futures.

“For oil to climb further, it will need more definite comments from either Saudi Arabia or Russia about extending the output deal beyond six months.”

West Texas Intermediate for May delivery was at $50.19 a barrel on the New York Mercantile Exchange, down 5 cents, at 08:27 in Singapore. Prices slipped 36c to close at $50.24 on Monday. Total volume traded was about 70% below the 100-day average.

Brent for June settlement was down 6 at $53.06 a barrel on the London-based ICE Futures Europe exchange, after falling 0.8% on Monday. The global benchmark crude traded at a $2.41 premium to June WTI.

Libyan rebound

Libya’s crude production rebounded to about 660 000 barrels a day as the OPEC nation’s biggest oil field resumed output, according to a person familiar with the matter. The nation’s output had dropped to about 500 000 barrels a day last week when production was halted at the Sharara field.

OPEC pumped 32.095 million barrels a day last month, based on information compiled from analysts, oil companies and ship-tracking data. Among the 10 members bound by production caps, compliance weakened to 89% of pledged reductions from 104%.

As well as Nigeria and Libya, Saudi Arabia buoyed the group’s effort by cutting its own output by more than it agreed late last year.

Oil-market news:

During the oil price rout, islands in the Caribbean were exhibit A for the longest-lasting glut in three decades, with millions of barrels stored there. Now, that oil is flowing again, a sign the market is rebalancing.

Canadian crude shipments to the US are poised to shrink just as the effects of OPEC-led output cuts are being felt in the Caribbean. That’s good news for Mexico and other local oil producers.

Read Fin24's top stories trending on Twitter: Fin24’s top stories