Jul 29, 2016
Oil steadies, but month for WTI is worst in a year
, Reuters
Oil prices recovered on Friday after a week-long selloff but still finished the month nearly 15 per cent lower, with U.S. crude declining the most in a year because of a persisting glut.
Slower economic growth and high inventories of crude and refined oil products have driven Brent and U.S. West Texas Intermediate (WTI) crude futures 20 per cent below from their 2016 highs, technically placing them in bear market territory.
The two benchmarks matched April lows on Friday before their most actively traded contracts settled up on what traders said was short-covering by investors taking profit on bearish bets.
The dollar's drop to a three-week low also made greenback-denominated oil more affordable to holders of the euro and other currencies.
The Brent September contract, which expired as the front-month, settled at $42.46 a barrel, down 0.6 per cent on the day and 14.5 percent on the month. That was the biggest monthly drop for Brent since December.
The more actively traded Brent October contract rose 30 cents to settle at $43.53. October Brent had earlier slid to $42.52, its lowest since April 19.
WTI's front-month contract, September, rose 46 cents, or 1 per cent, to settle at $41.60 a barrel, after slipping earlier to below $41 for the first time since April 20. For the month, the contract finished down 14 per cent, the biggest decline for a WTI front-month since July 2015.
Crude prices are still up more than 55 per cent from 12-year lows of $26 to $27 in the first quarter. The recovery faded after prices above $45 enticed oil drillers to return to the well pad. Drillers this week added three rigs to raise the U.S. oil rig count for a fifth straight week.
Cheap crude has led refiners to produce more fuel worldwide, adding to an oversupplied market. Oil majors ExxonMobil Corp (XOM.N), BP Plc (BP.N), Royal Dutch Shell Plc (RDSa.N) and Chevron Corp (CVX.N) each had a poor second quarter because of weak refining margins.
"Doubts are rife as to whether the oil supply imbalance is indeed slowly drawing to an end," said Stephen Brennock, of London-based oil brokers PVM.
Some traders said oil could see technical support in the near-term after Brent and WTI fell below their 200-day moving averages on Friday.
Analysts in a Reuters survey published on Friday said they expected higher oil prices this year based growth in demand.
"We are maintaining a bearish posture while at the same time suggesting that additional crude price declines of around $4 a barrel from current levels could require a few more weeks," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
