Oil trades near five-month lows despite Saudi cut assurances
05 May 2017 - 22:48
Oil prices fell to five-month lows yesterday on concerns about a persistent glut despite assurances from Saudi Arabia that Russia is ready to join Opec in extending supply cuts.
US West Texas Intermediate (WTI) crude oil futures fell more than 3 percent in early trading to less than $44 a barrel, the lowest since November 14. It fell 4 percent on Thursday. Benchmark Brent also fell 3 percent to below $47, its lowest since November 30, which was the date the Organisation of the Petroleum Exporting Countries (Opec) triggered a rally when it said it would cut production in the first half of 2017.
Both benchmarks trimmed losses to trade near Thursday’s close by 13:20 GMT after Saudi Arabia’s Opec Governor Adeeb Al Aama told Reuters that Opec and non-Opec nations were close to agreeing a deal on supply cuts.
“Based on today’s data, there’s a growing conviction that a six-month extension may be needed to rebalance the market, but the length of the extension is not firm yet,” the Saudi official said. Opec sources said on Thursday that Opec is likely to extend cuts when it meets on May 25 but that a deeper cut is unlikely. Opec and non-Opec states initially agreed to cut 1.8 million barrels per day (bpd) in the first six months of 2017.
Brent traded volumes on Thursday reached a record high of nearly 542,000 contracts, suggesting that hedge funds had accelerated reductions to their long positions.
Pierre Andurand, who runs one of the biggest hedge funds specialising in oil, liquidated his fund’s last long positions in oil last week and is running a very reduced risk at the moment, a market source familiar with the development said.
Both Brent and WTI futures are down about 17 percent so far this year despite Opec efforts to support prices. Adding to concerns about bulging inventories, traders pointed to soaring US oil output, which is up more than 10 percent since mid-2016 to 9.3 million bpd , almost matching output of top producers Russia and Saudi Arabia.