Oil prices struggle to hold onto gains, but still 8% higher on the week
London (Aug 19) Oil prices eased back on Friday as investors stepped in to take some profits, with Brent fighting to stay $50 and U.S. crude prices hovering atop $48.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU6, +0.00% traded flat at $48.21 a barrel. October Brent crude LCOV6, -0.29% on London’s ICE Futures exchange fell $0.23, or 0.4%, to $50.68 a barrel. Both benchmarks have gained around 8% on the week.
Upbeat prospects of a rebalance which flipped oil into a bull market Thursday night, was stoked by drawdowns in the U.S. crude and gasoline stocks, declining production in China and Latin America, and recent indications that major producers in and outside of the Organization of the Petroleum Exporting Countries could take steps to stabilize prices.
Prices are still down by more than half from above $100 a barrel in 2014, but they are up 80% from six months ago, when they crashed to a decade low of below $30 a barrel.
The second-oldest confirmed shipwreck in the Great Lakes was discovered below the surface of Lake Ontario in late June by a group of retirees who hunt for sunken ships in their spare time.
pite visible signs of a tighter market ahead, much of the trade has been psychologically driven and could easily snap back below the $50 level, said Ric Spooner, chief market analyst at CMC Markets.
“The market is very vulnerable to news right now,” he said, adding that he was skeptical about OPEC member’s commitment to rejuvenate the market as the 14-member bloc is known to place their own individual market share as a foremost priority, even if it means engaging in a price war.
Higher prices usually drive demand lower, but with the world still flushed with excess barrels, analysts say the overhang, and not the higher prices, is the main reason why demand growth may remain muted over the next few months until it picks up again during winter, the peak season for heating oil.
A case in point is China, whose crude imports is expected to reach 7.3 million barrels a day, said Energy Aspects, compared with 7.55 million barrels a day seen in the January to June period.
The slow down is largely due to the existing high inventories, softening domestic demand for fuels and refiners undergoing maintenance.
“With the inventories so high, what is the incentive for Chinese refiners to buy at $50 even though it is still relatively cheap?” said Alex Poon, vice president of Admis, a Hong Kong-based brokerage firm.
Nymex reformulated gasoline blendstock for September RBU6, -0.62% — the benchmark gasoline contract — fell 36 points to $1.4861 a gallon, while September diesel traded at $1.5224, 36 points lower.
ICE gasoil for September changed hands at $445.50 a metric ton, up $3.25 from Thursday’s settlement.