Crude futures bounced back from five-month lows Friday, following a week of steep losses globally as investors continue to worry about brimming crude inventories. Oil prices have fallen hard as investors wonder if OPEC will extend a deal that trimmed oil production.
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“Now here we are moving toward the middle of the second quarter and we’re still seeing the same amount of crude being loaded on a global basis”, he said.
However, even the extension of the OPEC agreement by another six months until the end of 2017 would not lift oil prices above $60 per barrel due to a number of limiting factors, including the rising production of shale oil in the United States, which increased to 9.29 million barrels per day last week, the highest level since August 2015, experts warned.
European shares opened mostly lower, with France’s CAC 40 down 0.4 percent to 5,353.22 and Germany’s DAX down 0.4 percent to 12,605.37.
The Philippine Stock Exchange Index jumped 86.24 points, or 1.1 percent, to 7,841.99 on a value turnover of P14.6 billion. Wall Street was poised to open lower.
Brent crude fell below US$50 on Thursday for the first time since late March but gained back some ground on Friday to close at $49.10.
Exxon, Total, Royal Dutch Shell, BP and Chevron reported combined first-quarter free cash flow – money they can use to pay dividends – of US$11.4 billion (S$16 billion), compared with a shortfall of US$14 billion a year earlier, according to data compiled by Bloomberg.
For such companies, multiple signs of a trend change were clear this week: a nose-dive in Chinese iron ore futures, big losses in gold and copper prices and persistently high oil inventories that spooked crude oil traders. But an extension to the production cut agreement is far from a done deal, with many details to be negotiated, including cut levels, exemptions and duration, amid an increasingly skeptical market.
In the last two to three weeks, many bullish hedge funds seem to have finally given up waiting for a short-term turnaround and chose to cut their losses (“Hedge funds lose faith in OPEC”, Reuters, May 2).
Three years into the oil slump, Saudi Arabia, the world’s largest oil exporter, still needs US$83 crude to balance its budget, according to the International Monetary Fund.
The dilemma continues to arise when the replacement barrels from the U.S. market seem to swiftly fill the gap in production, cancelling out the efforts and sacrifice of the OPEC players. In the same breath, Saudi Arabia has lost its magic wand of determining the global oil prices.
The market needs either a “supply shock or demand shock for the glut to evaporate, and so far we have not seen that”, he said. Australia’s S&P/ASX 200 fell 0.7 percent to 5,835.20.
WTI was riding just above $46 dollars a barrel with several hours before the American markets closed.
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Renewed weakness in China, an expected hike in U.S. interest rates―which could make dollar-denominated oil more expensive to holders of other currencies―and signs of slowing demand have also contributed to the dive. The euro edged up to $1.09876 from $1.0984.
