Published: Wed, June 28, 2017
Business | By Jorge Reeves

Oil declines for fifth week as supply climbs

Oil declines for fifth week as supply climbs

Oil prices rebounded on Monday after last week's seven-month lows, but were hemmed in by a relentless rise in U.S. supply and a surge in demand for short sale contracts that signal investors see potential for a price fall.

US drillers last week added rigs for the 23rd week in a row, according to data from energy services company Baker Hughes, implying that further gains in domestic production are ahead.

Economic momentum could spur demand, which has emerged as a lead indicator for oil prices, with USA figures on gasoline inventory levels offering a clue on consumer sentiment.

Essar Oil's oil imports from Iran in May also rose 19.1 percent compared with April to about 186,600 barrels per day (bpd), according to tanker arrival data obtained from trade sources and ship-tracking services on the Thomson Reuters terminal.

Despite the cuts, which started in January, markets remain well supplied due to rising output elsewhere.

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One possible reason for the low demand is even though USA shale oil producers have raised their production and countries like Libya and Nigeria have increased their output, new buyers are not in a hurry to purchase it regardless that the price of oil per barrel has declined.

"For one thing, U.S. crude oil production continues to rise and inventories remain high".

"The market has fallen a lot as the news has been bad pretty consistently for the oil market", said Ric Spooner, chief market analyst at CMC Markets in Sydney.

Analysts at Bank of America-Merrill Lynch said demand was not growing quickly enough to absorb output, especially since imports in Asia are stuttering.

"It is just the fact that the oil market stopped falling ..."

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Commerzbank said in a research note that long positions in Brent on ICE are "at their lowest level in a year and a half", while short positions "have soared to a new record high, having increased more than four-fold since the beginning of the year". The contract added 29 cents, or 0.6 percent, to $45.83 on Monday.

USA crude futures were up 37 cents, or 0.8 percent, at $43.38 a barrel. "I don't think OPEC is going to cut deeper, at least not for now". While inventories have steadily declined, American oil production has climbed above 9.3 million barrels a day to the highest level since August 2015.

OPEC member countries and its partners have been trying to reduce a global crude glut with production cuts.

"Looking into the second half of 2017, we now doubt that demand growth will accelerate sufficiently", they wrote.

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The total turnover on BSE amounted rose to Rs 7,395.04 crs from Rs 4,693.41 crore registered during the previous trading session. At 1.00 p.m., the wider Nifty of the National Stock Exchange ( NSE ) fell by 45.40 points, or 0.47 per cent, to 9,584.60 points.

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