Oil Set for Weekly Drop as Supply Concerns Weigh

Posted by Joseph Keefe
Friday, March 16, 2018
IEA sees 2018 global oil demand increasing by 1.5 mln bpd.
Oil prices were set for a weekly drop despite a slight gain in both benchmarks on Friday, on concerns that rising global supply could undermine efforts by OPEC and other producers to tighten the market.
West Texas Intermediate (WTI) oil futures for April delivery rose 14 cents to $61.33 a barrel by 1145 GMT, after settling up 23 cents on Thursday. WTI was set to fall 1.3 percent this week, reversing the previous week's 1.3 percent gain.
Brent crude futures trading in London climbed 6 cents to $65.18 a barrel, after settling up 23 cents. Brent was down 0.5 percent for the week.
Reports this week refocused investor attention on the potential for rising supply to overwhelm expected gains in crude demand for 2018.
On Thursday, the International Energy Agency (IEA) said global oil supply increased in February by 700,000 barrels per day (bpd) from a year ago to 97.9 million bpd.
The IEA also said supply from producers outside of the Organization of the Petroleum Exporting Countries (OPEC), led by the United States, would grow by 1.8 million bpd this year from an increase of 760,000 bpd last year.
The supply increase is more than the IEA's expected demand growth forecast for this year of 1.5 million bpd.
The agency also said commercial oil inventories in industrialised nations climbed in January for the first time in seven months.
"Part of the stock build is seasonal but some investors did not expect it to happen in an era of production cuts, which suggests the OPEC cuts may not be enough," Olivier Jakob of Petromatrix consultancy in Zug said.
OPEC and other producers began cutting supply in January 2017 to erase a global crude glut that had built up since 2014.
On Wednesday, the U.S. government reported that crude stockpiles there increased by a more-than-expected 5 million barrels, rising for a third straight week.
"Looking forward to next week, the Saudi crown prince (Mohammed bin Salman) will be in Washington with the potential for more strong rhetoric against Iran that could add support and volatility," Jakob of Petromatrix added.
Political risk linked to Tehran increased after Rex Tillerson was sacked as U.S. secretary of state in favour of an Iran and North Korea hawk, and the crown prince said Riyadh would develop nuclear weapons if Iran - its arch-rival - did so.

(Reporting By Julia Payne 

Categories: Contracts Tankers Finance Energy Logistics Offshore Energy Shale Oil & Gas

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