Oil prices dip on profit-taking, but OPEC deal limits losses

Oil prices almost hit $70/barrel earlier in the session, but dipped slightly as investors took profits following the week’s rally.  Anadarko photo.

US oil prices down about 1 per cent Thursday

Oil prices fell slightly on Thursday as investors withdrew profits following the week’s rally, but OPEC’s continuing efforts to cut production and curb the global crude glut helped limit losses.

By 1:50 p.m. EDT, Brent crude was down 60 cents to $68.47/barrel.  Earlier in the session, Brent topped out at $69.70/barrel, which was close to its highest level since February.  US WTI fell 76 cents to $64.41/barrel, down from a session high of $65.74.  The Canadian Crude Index dipped 26 cents to $43.14.

“Ahead of that $66 level in WTI, there’s some profit-taking to test whether you’re really in a new technical uptrend or if you’re still in a trading range,” Rob Haworth, senior investment strategist at U.S. Bank Wealth Management told Reuters.

A decline in US equities on Thursday also pressured oil prices.

The weaker US dollar and mounting tensions between Iran and Saudi Arabia have boosted oil prices almost 10 per cent in the past two weeks.

Analysts are concerned that the supply of Middle East crude may be impacted due to the OPEC pact that has cut production amongst its participants by 1.8 million barrels per day (b/d), and the tumultuous relations between the two oil super powers.

Also supporting oil prices was data from the US Energy Information Administration released Wednesday reporting a surprise decline in US crude stocks.  As a result, oil prices saw their largest one day gain since November in the previous session.

The EIA reported US crude inventories fell by 2.6 million barrels last week.  Analysts polled prior to the data release had anticipated an increase of 2.6 million barrels.

The drop in US crude stocks was driven by lower imports of crude and higher refinery runs.

Rising US production has tempered the confident mood in the oil market. The EIA reports US crude production hit a record high last week of 10.4 million b/d last week.  The United States is second only to Russia in oil production.

Russia currently produces 11 million b/d and the US is expected to hit that mark later in the year.

“We are still viewing rapidly rising production into record high territory as a latent bearish consideration that will only be accentuated by this renewed high pricing environment,” Reuters reports Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.