REUTERS – Oil prices have settled down more than three per cent, retreating from last week’s two-month highs, on worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising US oil rig count.
China’s July diesel and petrol exports soared 181.8 per cent and 145.2 per cent, respectively, from August 2015, putting pressure on refined product margins.
In the United States, BP Plc’s 413,500 barrel per day refinery in Whiting, Indiana, returned to normal production for the first time since late July, adding to refined products supply.
On the crude oil front, US drillers added 10 oil rigs in the week to August 19, the eighth straight week of rig additions, as crude rebounded toward the $US50-a-barrel mark that makes drilling viable.
Elsewhere, Iraq plans this week to increase exports of Kirkuk crude by 150,000 bpd from its northern fields while Nigerian rebels who regularly attacked oil facilities in the country earlier this year said they were ready for a ceasefire.
Brent crude settled down $US1.71, or 3.36 per cent, at $US49.17 a barrel. It hit a two-month high of $US51.22 on Friday.
US West Texas Intermediate (WTI) crude’s front-month contract, September, closed down $US1.47, or 3.03 per cent, at $US47.05 before expiring. It hit a six-week high of $US48.75 on Friday. WTI’s more active second month position, October, closed down $US1.70, or 3.6 per cent, at $US47.41 a barrel.
Oil rallied with few stops over the past two weeks, going from a bear to bull market as it reversed a loss of more than 20 per cent in early August on speculation Saudi Arabia and the rest of the Organization of the Petroleum Exporting Countries will agree to a production freeze with Russia and other non-OPEC members.
“We continue to view a meaningful OPEC production agreement as highly unlikely,” Wall Street investment bank Morgan Stanley said in a note.
“It is unlikely Riyadh will take any freeze negotiation seriously as officials believe the market share policy is slowly but surely working,” Morgan Stanley said, referring to the Saudi policy of defending market share over price support.
It added, however, that oil could be volatile between now and late September before OPEC and other producers meet in Algeria.
British investment bank Barclays said $US50 a barrel and above were unsustainable given the crude output and fuel oversupply situation.
“Oil prices will likely experience another short-term dip in the coming weeks,” it said.
Data from energy monitoring service Genscape, showing a drawdown of more than 187,000 barrels last week at the Cushing, Oklahoma delivery hub for WTI futures did little to boost prices, although it narrowed the September contract’s discount to October to a two-month low.
Extracted in full from Townsville Bulletin.
