Oil stays mixed as investors short-cover, Saudi Arabia boosts production

Published: July 07, 2018 21:13:17

NEW YORK, Jul 07 (Reuters): Oil was mixed on Friday, with short-covering pushing up US crude futures while Brent slipped on global trade tensions and increased Saudi production.
West Texas Intermediate crude futures CLc1 gained 61 cents to $73.55 by 11:30 a.m. (1530 GMT). Global benchmark Brent LCOc1 was down 39 cents at $77 a barrel.
For the week, WTI was on track for a loss of about 0.4 per cent while Brent was down about 3 per cent.
"We have a little bit of a rally that's materialized" for WTI, said Bob Yawger of director of energy futures at Mizuho in New York.
The rally appears to be a "short covering situation - we were down almost 2.0 per cent yesterday," said Yawger.
US crude futures slipped on Thursday after data showed an unexpected 1.3 million-barrel build in crude inventories.
Brent, meanwhile, was "still having difficulty gaining independent bullish traction," said Jim Ritterbusch, president of Ritterbusch and Associates in a note.
"Increased Saudi crude availability that is being enhanced by reduced OSPs (official selling prices) into Europe and other regions is providing a strong counter against curtailed Libyan export activities," Ritterbusch wrote.
In addition to reducing the price of its August barrels, Saudi Arabia also told the Organisation of the Petroleum Exporting Countries (OPEC) that it increased production by almost 500,000 barrels per day last month.
Output cuts by OPEC and allies since January 2017 have reduced a crude glut.
Involuntary drops in supply in Venezuela, Angola and Libya have made the cutbacks even bigger, although OPEC - led by Saudi Arabia - has since agreed to a modest increase in output.
"The more that Saudi Arabia adds to the market, the less of a supply cushion we have - that's a bullish twist to a bearish development," said Yawger at Mizuho.
An imminent shift in global oil trade flows was also affecting prices.
US tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday and Beijing has vowed to respond in kind.
China has indicated that it could place a tariff of 25 per cent on US oil. If that happens, "Chinese demand would then shift to other suppliers.
Because the oil market is already in tight supply due to the numerous outages, this would drive international prices (Brent) further up," Commerzbank said in a note.

Share if you like