NEW YORK (Reuters) – Oil costs fell on Friday as considerations about surging U.S. output and falling demand in China weighed on the contract and JP Morgan reduce its value forecast.
Brent crude futures LCOc1 settled down 86 cents, or 1.1 p.c, at $76.46 a barrel. U.S. West Texas Intermediate (WTI) crude futures CLc1 ended 21 cents decrease at $65.74 a barrel. For the week, Brent fell zero.5 p.c, whereas U.S. crude slipped zero.three p.c.
In the previous three weeks, costs have declined from three-year highs because the market has contended with provide considerations. On Friday, oil costs got here underneath strain after knowledge recommended Chinese demand was waning and considerations lingered about rising U.S. output.
Hedge funds and different cash managers reduce their bullish bets on U.S. crude futures within the week ended June 5, the U.S. Commodity Futures Trading Commission (CFTC) stated.
JP Morgan reduce its 2018 crude forecast for WTI by $three to $62.20 a barrel. The financial institution stated geopolitical tensions and lingering dangers of provide disruptions might push costs larger in the course of the second half 2018, it expects costs will head decrease late within the yr, and stay capped in 2019.
The futures contracts dipped after the forecast was issued, after which pared losses.
China’s May crude oil imports eased away from a document excessive hit the earlier month, customs knowledge confirmed, with state-run refineries getting into deliberate upkeep.
May shipments have been 39.05 million tonnes, or 9.2 million barrels per day (bpd). That in contrast with 9.6 million bpd in April.
Further weighing on costs has been rising U.S. output C-OUT-T-EIA, which hit one other document final week at 10.eight million bpd.
U.S. drillers added one oil rig within the week to June eight, bringing the entire depend to 862, the best degree since March 2015, General Electric Co’s Baker Hughes vitality companies agency stated in its intently adopted report. RIG-OL-USA-BHI [RIG/U]
The surge in U.S. manufacturing has pulled down WTI into a reduction versus Brent CL-LCO1=R of greater than $11 a barrel, its steepest since 2015.
MARKET STILL TIGHT
Despite Friday’s decline, Brent stays greater than 15 p.c above its degree at the beginning of the yr.
U.S. funding financial institution Jefferies stated the crude market is tight and spare capability may dwindle to 2 p.c of demand within the second half of 2018, its lowest degree since not less than 1984.
Markets have been tightened by provide hassle in Venezuela, the place state-owned oil firm PDVSA is struggling to clear a backlog of about 24 million barrels of crude ready to be shipped to prospects.
More usually, Brent has been pushed up by the voluntary manufacturing cuts put in place final yr, led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia.
OPEC and Russia meet on June 22/23 to debate manufacturing coverage.
On Friday, OPEC’s third-largest producer Iran criticized a U.S. request that Saudi Arabia pump extra oil to cowl a drop in Iranian exports and predicted that OPEC wouldn’t heed the attraction.
Headlines on OPEC members’ plans for the assembly later this month will result in risky market swings, stated Tariq Zahir, managing member of Tyche Capital Advisors in New York.
“I believe it’ll be very uneven,” he stated.
Additional reporting by Shadia Nasralla and Dmitry Zhdannikov in London, Henning Gloystein in Singapore; Editing by Marguerita Choy and Phil Berlowitz