Friday 29 Mar 2024
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NEW YORK (May 16): Brent rebounded from Friday's early weakness while U.S. crude held to losses as traders and investors debated whether oil's rally over the past month and a half should continue amid stubbornly high supplies.

Futures of North Sea Brent have rallied nearly 20 percent since the end of March, while U.S. crude futures have risen almost 30 percent. Crude inventories in the United States, meanwhile, remain near 80-year highs.

To some, that suggests a market that has overshot and likely to correct.

"A mood change is in the air," Eugen Weinberg, global head of oil and commodities research at Commerzbank in Frankfurt, told the Reuters Global Oil Forum. "The oil price rally looks like it may be slowly running out of steam."

U.S. crude settled down 19 cents at $59.69 a barrel, after falling more than $1 during the session as a stronger dollar pulled down commodities denominated in the currency. But on a weekly basis, the market was up for a ninth straight week.

Brent, the more important oil benchmark, settled up 11 cents at $66.81 a barrel. On a weekly basis, Brent was up in five of the past six weeks.

The mixed trend played out in the oil products markets too, with gasoline settling down for the day and heating oil rebounding from early losses.

Critics of the oil rally point to a market that remains oversupplied nearly a year after the selloff in crude began last summer, knocking prices off highs above $100 a barrel.

The International Energy Agency said this week that key producers in OPEC are pumping at least 2 million barrels per day (bpd) more than required.

The U.S. Energy Information Administration says world stocks are rising at 1.95 million bpd this quarter and will build at least through 2016.

On Friday, data showed the number of U.S. rigs drilling for oil fell just by 8 this week, the least since December, after declines numbering in the dozens earlier.

U.S. demand for fuel is likely to pick up in the second half but global production runs well ahead of consumption. Without a major, unexpected disruption, the glut will stay, analysts say.

"We still have almost 485 million barrels in crude inventories," Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, said, referring to U.S. stockpiles. "That's a ton in supply."

 

 

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