Monday, March 28, 2016

Oil trades near $39 amid doubts producer talks will curb glut

NEW YORK  -- Oil traded near $39/bbl in New York amid speculation that a meeting of crude-producing countries next month won’t ease a global supply glut.

Futures fell after earlier rising as much as 1.7%. Iran and Libya are the two OPEC members that haven’t pledged to attend production-freeze talks on April 17 in Doha, Qatar. The absence of the countries that aim to restore supplies shuttered by conflict and sanctions means any accord is unlikely to be effective, Commerzbank AG said last week.

"There’s a growing realization that the meeting in Doha is not going to be effective," said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. "The U.S. has lost about 500,000 bopd from its peak, but the Iranians are planning to increase output by more than 1 million, so we’re going to see the surplus grow."

Oil has climbed back from a 12-year low last month on speculation that the global surplus will ease as U.S. output declines and major producers including Saudi Arabia and Russia discuss capping output. U.S. data last week showed inventories rose by more than three times what was forecast, while imports increased to the highest since June 2013.

West Texas Intermediate oil for May delivery fell 30 cents, or 0.8%, to $39.16/bbl at 10:11 a.m. on the New York Mercantile Exchange. Total volume traded was 48% below the 100-day average.

Brent for May settlement slipped 43 cents, or 1.1%, to $40.01/bbl on the London-based ICE Futures Europe exchange. Prices slipped 1.8% last week. The global benchmark crude traded at an 85-cent premium to WTI.

Trading in New York and London was closed Friday for the Good Friday holiday.

Hedge Funds

The number of bets on rising oil has barely increased as crude jumped more than 50% since Feb. 11. Meanwhile, the liquidation of short positions during the past seven weeks covered by data from the U.S. Commodity Futures Trading Commission was the largest in records going back a decade. That suggests the upward pressure on prices has come from traders cashing out of bearish wagers.

Rigs targeting oil in the U.S. fell by 15 to 372, the lowest since 2009, Baker Hughes Inc. said on its website Thursday. More than 150 have been parked since the start of the year.

"There was speculation that the return of $40 oil would lead to a return of rigs," said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. "The data shows this isn’t the case."

Iran investment; Producer meeting:

Iran, committed to boosting output after sanctions were lifted in January, needs $40 billion for oil projects in the year ending next March, according to Oil Minister Bijan Namdar Zanganeh. Oman, a non-OPEC oil exporting country, will attend the Doha meeting, CNBC Arabia reported.


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