Oil prices were largely steady yesterday and looked set to finish the week with modest gains after losing almost 10% last week on concerns that an Opec production cut was failing to reduce a global supply overhang.
Crude traded in a narrow band this week, with Brent and West Texas Intermediate bouncing in a $2.50 range as investors weighed the impact of the first oil cut from Opec in eight years against rising US shale oil output and high inventories.
However, oil has not been able to reclaim the range that prevailed through most of 2017 before last week’s rout.
Instead of rebounding to $53 a barrel, US crude has remained stuck around $49. Analysts anticipate regaining the old levels may be difficult without significant drawdown in inventories.
The market even failed to rebound after Saudi Arabia minister Khalid al-Falih said on Thursday the cuts by the Opec and non-Opec producers could be extended beyond June if oil stockpiles stayed above long-term averages.
Opec and non-Opec members agreed last year to cut output by a combined 1.8m barrels per day in the first half of 2017.
“Neither a weaker dollar nor Saudi talk of doing ‘whatever it takes’ to bring inventories down to healthier levels is inspiring much buying,” said Timothy Evans, analyst at Citi Futures in New York.
Saudi Arabia has cut output by more than its share under the November 2016 deal. Some ask whether it has the appetite to continue while several Opec and non-Opec states fail to comply and as shale production is expected to rise.
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