Oil prices were largely unchanged early Friday after a week of profit-taking with traders and analysts both seeing a return of oversupply concerns. This has led the market lower, snapping a multi-week bull run that was Brent’s longest in 16 months.
Experts see benchmark Brent dropping below $55 a barrel and West Texas Intermediate below $50 in a couple of weeks
“We have a couple of bearish factors like a new record for U.S. crude exports, the reopening of Libya’s biggest oilfield, a new year high in U.S. crude production and the recent strength of the U.S. dollar,” Schallenberger said.
“I expect Brent to drop below $55 a barrel and WTI below $50 in the next couple of days.”
Investors were particularly wary of tropical storm Nate shutting down some oil production in the Gulf of Mexico ahead of its expected arrival in the area as a hurricane on Sunday but it appears the concerns would be on refiners and gasoline supply and not necessarily on crude production, according to market analysts.
“The biggest impact (from Nate) could be on gasoline prices, depending on how many refineries are forced to shut down. But I don’t think we will see another bull run,” Frank Schallenberger, head of commodity research at LBBW in Stuttgart is reportedly have said.
Global benchmark Brent crude futures LCOc1 were up 7 cents at $57.07 a barrel early Friday. Week on week, the contract was set for a near one percent loss, snapping a five-week winning streak that was the longest since June 2016.
U.S. West Texas Intermediate (WTI) crude CLc1 was at $50.59, down 20 cents. It was set to close the week down more than two percent, the biggest weekly loss in three months.
However, in the Gulf of Mexico, BP and Chevron were expected to shut production at all platforms, while Royal Dutch Shell and Anadarko Petroleum suspended some activity on expectations of hurricane Nate. Exxon Mobil, Statoil and other producers are said to have withdrawn personnel. But analysts say the effect would not be much on supply of crude in the internationalmarket.
The prospect of extended oil production cuts by the Organization of the Petroleum Exporting Countries and other producers led by Russia had supported prices in recent sessions.
Saudi Arabia’s energy minister said on Thursday he was “flexible” regarding Moscow’s suggestion a day earlier to prolong the production-curbing pact until the end of 2018.
However, concerns linger about growing U.S. crude exports, incentivized by a hefty WTI discount to Brent prices.