Futures fluctuated between losses and gains in New York amid low volume trading. Exxon declared force majeure on shipments of Nigeria’s biggest crude export grade.
Force majeure —a legal clause that allows Exxon to stop shipments without breaching contracts — was declared on Qua Iboe terminal crude after “a system anomaly observed during a routine check of its loading facility,” the company said
China processed a record amount of crude in the first half of 2016 as its GDP in the second quarter exceeded estimates, adding support to the market.
Meanwhile, US crude production last week rose for the first time since early June and petrol and distillate stockpiles climbed, according to the Energy Information Administration.
“We have bullish news. We have bearish news. It’s a moody market,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said.
“The big bear case is we have this flood of product and it’s going to take some time to overwork that,” he said.
Oil has traded $44 to $51 a barrel since early May and has climbed from a 12-year low in February amid a string of supply disruptions including attacks in Nigeria.
While there’s still a consensus that the worst of the oil glut is over, the International Energy Agency cautioned this week that “the road ahead is far from smooth” amid seasonal weakness in demand and the return of some halted supply.
Analysts including BNP Paribas and JBC Energy warned that prices may sink toward $40, due in part to seasonal demand weakness. Crude fundamentals are weaker than many realise, according to Julius Walker, senior consultant at JBC Energy in Vienna.
US inventories are brimming after two years of surplus production and demand for petrol — the key driver of prices in summer — is proving to be disappointing.
Stockpiles of the fuel rose 1.21 million barrels last week and refiners reduced operating rates by 0.2 percentage points to 92.3% of capacity, according to the Energy Information Administration.
“We haven’t sorted out our excess supply problems. Unless you see visible reductions in inventories and more pronounced declines in US shale production, the market will have to go back to $40,” said Harry Tchilinguirian, head of commodities research at BNP Paribas in London.
West Texas Intermediate crude was up nearly 1% at $46.06 yesterday, with Brent crude rising 47c to $47.84.
“The market seems to be at the point where it’s weighing its options whether or not it can move higher,” added Mr Tchilinguirian.