One analyst says high US production, rising gasoline stocks and a shrinking price premium of Brent over WTI paints a bearish picture for oil prices. Statoil photo.
Oil prices mixed, premium of Brent over WTI near its lowest in six months
Oil prices were mixed in seesaw trading on Thursday on a weak US dollar and comments from Saudi Arabia and OPEC saying the 24 producers participating in the cartel’s supply cut agreement are planning to institutionalize the deal.
By 1:37 p.m. EST, benchmark Brent had dipped by 24 cents to $64.12/barrel and US WTI rose 43 cents to $61.03/barrel. The Canadian Crude Index was up to $35.07.
Reuters reports the premium of Brent over WTI is near its lowest level in six months.
“I’m surprised that oil prices are falling today given the weaker U.S. dollar. Currently, the direction of the dollar is having a bigger impact on oil prices than fundamentals,” Rob Thummel, portfolio manager at energy investment manager Tortoise Energy told Reuters.
The dollar is closing in on the three-year low it hit in late January. A weaker greenback makes crude cheaper for users of other currencies.
Oil prices were underpinned after Saudi Arabia’s energy minister Khalid al-Falih said OPEC would be better off leaving the market tight than end the OPEC supply cut deal too soon.
“Khalid al-Falih gave his strongest hint yet that exiting the current supply agreement is unlikely to be on the agenda this year,” said Tamas Varga of oil broker PVM.
On Thursday, The National reported that United Arab Emirates’ Energy Minister Suhail Al Mazrouei said that by the end of 2018, a super group of 24 oil producing countries will have a plan in place to institutionalize the OPEC supply cut agreement.
According to the report, officials are optimistic there is strong support for making the OPEC supply cut deal a more permanent fixture of energy markets.
However, the US Energy Information Administration projects US production to top 11 million barrels per day by late 2018, one year earlier than projected in January. Rising US production has cut into the OPEC deal’s effectiveness in reducing the global glut of crude.
“Persistently high oil production in the United States, the country’s gasoline stocks at their highest level since March 2017, and a shrinking price premium of Brent over WTI crude portrays a bearish picture for oil prices,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics told Reuters.
On Wednesday, the EIA reported US crude inventories rose by 1.8 million barrels last week, less than analysts had predicted. Gasoline stocks were up by 3.6 million barrels, more than double analysts’ expectations.