Oil's April rollercoaster takes it back to $50 on supply demand

After a rally in the first half of April, oil is set to end the month back below $50 a barrel.

Futures are down 2.3% this month in New York after slipping 6.3% in March. That belies three straight weeks of gains that ended April 14. What’s worrying investors is expanding US crude output, which is damping optimism that Opec-led supply cuts will be extended. While American production has expanded to the highest since August 2015, Saudi Arabia’s energy minister has acknowledged that the first quarter of curbs failed to bring stockpiles below the five-year average.

While the Organisation of Petroleum Exporting Countries and its allies mull an extension to the six-month deal past June to drain a global glut, US drillers targeting crude continue to add rigs to shale fields, boosting the count to the highest since April 2015.

In a nascent sign that stockpiles may be starting to shrink, American inventories have fallen for the past three weeks after climbing to a record at the end of March.

"Now that prices are under $50, the market is in a bit of a wait-and-see mode and there is an expectation that we will see inventories start to fall,” said Ric Spooner, an analyst at CMC Markets in Sydney.

"Most see the Opec production agreement being extended, so there may be some upside if that is confirmed."

West Texas Intermediate for June delivery rose as much as 1.4% on Friday from the lowest level in a month after hitting a technical support. They were up 47 cents at $49.44 a barrel on the New York Mercantile Exchange by 2:29 in Hong Kong, bouncing off a Fibonacci retracement level.

Total volume traded was about 5% below the 100-day average. Prices lost 1.3% to $48.97 on Thursday, snapping a two-day gain.

Opec compliance

Brent for June settlement, which expires Friday, was 44 cents higher at $51.88 a barrel on the London-based ICE Futures Europe exchange. Prices are down 1.8% this month.

The global benchmark crude traded at a premium of $2.42 to WTI. The more-active July contract rose 46 cents to $52.28.

Global stockpiles increased by less than average during the first quarter and compliance to supply cuts was at 98% in March, Opec Secretary-General Mohammad Barkindo said in Paris on Thursday. Putting pressure on the group is Libya, which is exempt from the curbs.

The African nation has restarted output at its largest field and plans to restart another facility.

Oil-market news:

Total SA is investing for growth again as it emerges from the two-year oil slump, with plans to develop shale resources in Argentina and expand in Brazil, the company said on Thursday.

Russia has done its "utmost best" to implement the Opec-led supply cuts, according to Barkindo.