Oil prices on Thursday switched between small gains and losses, as worries about growing global inventories warred against bullishness tied to the latest bigger-than-expected reduction in U.S. crude stockpiles.
Brent crude briefly traded above $50 a barrel for the first time since early July, but then slipped back below that key level.
On the New York Mercantile Exchange, crude futures for delivery in September CLU6, 0.30% traded at $47.08 a barrel, up 29 cents, or 0.6%. October Brent crude LCOV6, -0.46% on London’s ICE Futures exchange gained 7 cents, or 0.1%, to $49.92 a barrel, after earlier climbing as high as $50.05.
Oil prices eked a 0.3% rise on Wednesday after the Energy Information Administration reported U.S. crude stocks contracted by 2.7 million barrels last week while gasoline stocks fell by 2.2 million barrels.
As the world remains awash with excess oil, any reduction in inventories or signs of a rebalance can be bullish for sentiment, said Michael Wittner, the chief commodities analyst at Societe Generale. Though at this level, U.S. crude and gasoline stocks are far above their five-year highs, he added.
Oil prices have risen around 9% since last Monday when the Organization of the Petroleum Exporting Countries announced it would discuss measures to stabilize the market. The 14-member bloc is due to meet in late September in Algeria.
The market was further encouraged after Russia, a non-OPEC player which produced 10.85 million barrels a day in July, threw its weight behind a possible collaboration among the producers.
However, the positive streak was soon snapped by the growing speculation over the commitment of these heavyweight producers, many of which are currently producing at elevated levels. Analysts say unless global demand surges, a production freeze at this level would have little impact on prices or the global oversupply.
The cartel also has a track record of undelivered pledges. Earlier this year, the proposal of an output cap was crushed after Saudi Arabia and Iran rebuffed the idea, underscoring the difficulty for political rivals to forge consensus.
Moreover, many say any price bump would only entice the U.S. shale producers to crank up their production.
“One unique trait of the U.S. shale producers is that they are very quick and responsive to price changes and could easily interrupt any supply arrangement,” said Ric Spooner, chief analyst at CMC Markets.
Still, the possibility of a concerted effort to stimulate the oil market has prodded Brent prices to test $50 per barrel, a level that many traders no longer consider sexy because of the anticipated strong resistance at that level.
“We see additional technical resistance scaling in at $50.72 ahead of prior highs at $51.92 to $52.29,” wrote Tim Evans, a Citi Futures analysts, who expects prices to bob in a narrow band until the OPEC meeting.
Nymex reformulated gasoline blendstock for September RBU6, 0.00% — the benchmark gasoline contract — rose by a penny to $1.46 a gallon.
Source : marketwatch.com