Oil Pares Early Gains, Trades Near $57 As Supply Glut Prevails
Brent crude LCOc1 pared early gains to trade near $57 a barrel on Friday, as a glut of oil that has halved prices since June overshadowed investors repositioning at the start of the year for an eventual recovery.
Brent has fallen to its lowest since 2009 as top exporter Saudi Arabia and other large Gulf producers have declined to cut production in the face of fast-growing U.S. shale oil output, despite pleas from other members in the Organization of the Petroleum Exporting Countries (OPEC).
“Nothing has changed on the supply side. Unless there are some supply cuts, oil markets can't be strong at the moment,” said Ken Hasegawa, commodity sales manager at Tokyo's Newedge Japan.
Brent crude LCOc1 for February delivery was up 10 cents at $57.43 at 1130 GMT (0630 ET), more than $1 below the day's high at $58.54, which was hit within 30 minutes of the open of trading. Prices touched a post-2009 low of $55.81 on Wednesday.
Traders said a number of buy orders would have been placed ahead of the start of the new year's trading, with some willing to bet prices will bounce this year as expensive oil projects are potentially shuttered or canceled.
Markets were shut on Thursday for the New Year holiday.
Front-month U.S. crude CLc1 for February delivery was up 28 cents a barrel from Wednesday's close at $53.55, after reaching an intraday high of $55.11 shortly after the start of trading.
Prices faced additional pressure on Friday on signs that output from some of the world's largest oil producers continues to rise.
Iraq, OPEC's second-largest producer, said December exports hit their highest level since 1980, averaging 2.94 million barrels per day, while output in Russia, the largest exporter outside OPEC, hit a post-Soviet record high in 2014.
In Libya, a senior oil official said a major fire in an oil storage tank at the North African country's largest crude export port had been extinguished.
The jump in oil prices early on Friday was also capped by surveys showing weak factory activity in China and Europe in December, underlining weaker growth that has slowed the rise in oil demand and weighed on prices.
In the United States benchmark oil prices took some support from data on Wednesday showing inventories USOILC=ECI fell by 1.8 million barrels in the last week, but an increase of 2 million barrels at the U.S. crude contract's delivery hub of Cushing, Oklahoma kept gains in check.