Oil prices hover close to $50

3rd June 2016, Comments 0 comments

Oil hovered close to $50 per barrel this week as traders tracked OPEC's refusal to set production limits and key data in the United States, the world's biggest consumer of crude.

The market began the week on the back foot on Monday after recent comments from Federal Reserve chief Janet Yellen, who suggested that US interest rates will soon rise, boosting the dollar.

A stronger greenback makes dollar-priced oil more expensive, denting demand and hurting prices.

Prices wobbled Tuesday as traders mulled recent Canadian and Nigerian supply outages that sent oil above $50 the previous week.

Crude edged lower Wednesday on the eve of a hotly anticipated meeting of the Organization of Petroleum Exporting Countries (OPEC) in Vienna.

The commodity initially fell Thursday after OPEC ended its gathering with no agreement, as expected, to lower or limit output despite a chronic supply glut.

However, it then rebounded after a US Department of Energy (DoE) report showed commercial crude inventories sank by 1.4 million barrels last week.

That dashed market expectations for a heavier drop of 2.5 million barrels, but still indicated solid pick-up in demand. The data was published one day later than normal due to a US public holiday on Monday.

"The decline in (US) stockpiles is helping underpin prices for now -- but the supply and demand dynamics have not changed," CMC Markets analyst Michael Hewson told AFP.

"The big question is how much more upside can we potentially see."

- Stats, not OPEC -

Petromatrix analyst Olivier Jakob added that traders were paying less attention to the cartel, which accounts for around a third of global oil supplies.

"The price volatility before and after the OPEC meeting has been marginal and confirms the new-normal of the market's lack of interest for OPEC," said Jakob.

"The media at large has not yet adapted to the new-normal but it does create a growing divergence between the amount of news headlines (large) and price movements (small) around OPEC meetings.

"In the end it was left to the weekly DoE statistic to pull back Brent towards $50 per barrel."

OPEC decided to keep oil gushing as the recent modest price recovery eased the pressure to curb output, with Saudi Arabia saying the cartel was "very satisfied" with the state of the market.

"Everybody is very satisfied with the market. The market is rebalancing as we speak," said Khaled al-Falih, the kingdom's newly-appointed oil minister.

Traditionally, OPEC has cut production to boost falling prices and protect precious revenues of the 13-nation cartel.

But in the most recent drop, tumbling from over $100 in 2014 to close to $25 in January, OPEC -- driven by Riyadh -- has changed tack, keeping oil flowing to maintain market share and squeeze competitors.

OPEC itself forecast last month that stubborn oversupply may ease by 2017 as a result of sliding non-OPEC production.

The International Energy Agency predicts the supply glut -- which sparked the vicious price collapse -- will shrink dramatically later this year.

On Friday, oil staged a modest pullback on disappointing US non-farm payrolls data.

In a shock employment report, the Labor Department said Friday that the US economy generated a paltry 38,000 net new positions in May, a quarter of that expected, and the lowest number since September 2010, the last time the jobs market actually contracted.

By about 1700 GMT on Friday, WTI for delivery in July stood at $48.85 a barrel, compared with $49.17 one week earlier.

Brent North Sea crude for August traded at $49.76 a barrel, up from $49.22 a week earlier for the July contract.

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© 2016 AFP

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