As a tumultuous week draws to a close, analysts remain pessimistic about the outlook for oil.
Oil prices ticked higher on Friday as the globe’s largest producers expressed willingness to stick to output cuts, capping a tumultuous week for a market that continues to be plagued by a global glut.
A second weekly decline in U.S. crude supplies helped prices recoup some of their recent losses. But prices were still stuck in a bear market, defined as a decline from a recent peak of at least 20%, on lingering worries about strong domestic production growth as the oversupply is so far proving immune to the limits set by the Organization of the Petroleum Exporting Countries and its big-producer allies including Russia.
August West Texas Intermediate crude CLQ7, +0.14% advanced 14 cents, or 0.3%, to $42.87 a barrel on the New York Mercantile Exchange. It fell 2.3% on Thursday to $42.53, the lowest most-active futures price settlement since Aug. 10, according to FactSet data.
Brent crude for August delivery LCOQ7, +0.13% on London’s ICE Futures exchange added 14 cents, or 0.2%, to $45.33 a barrel.
Signs that big producers are abiding by their deal to limit output and weather-related output challenges in the U.S. supported prices early Friday.
A monitoring committee made up of OPEC members and producers outside the group on Thursday said that compliance to the deal reached 106% in May, the highest since the deal was first clinched late last year.
“Traders are clearly unconvinced by the cuts that are intended to bring inventories down to their five year average, particularly against the backdrop of rising output from the U.S., Libya and Nigeria,” he said. “A clear break below $44.50 in Brent and $42 in WTI could trigger further downside for oil, with $40 being the next big test.”
Later Friday, energy investors will be focused on the weekly U.S. rig count. If the count, which is a rough proxy for the activity in the industry, increases again, it would be the 23rd consecutive weekly climb, deepening concerns that U.S. output is offsetting the OPEC cuts.
Analysts expect U.S. production to climb to a record next year, potentially even vaulting American producers ahead of Saudi Arabia in daily output.
Prices fell earlier this week as data from the Energy Information Administration showed a weekly climb in U.S. crude production. The report, however, also showed that crude stockpiles declined for a second week in a row.
Data this week also revealed U.S. shale-oil producers churning out 9.35 million barrels last week, almost 8% higher than the same period last year. While production growth rates showed signs of petering, the data reaffirmed market fears that U.S. producers have become more efficient to weather low prices.
Natural-gas prices finished nearly flat Thursday after losing 0.5% a day earlier. The EIA revealed that supplies of the fuel climbed by a larger-than-expected 61 billion cubic feet for the week ended June 16, but the increase was less than the 82 billion-cubic-foot five-year average rise for that week, according to Tim Evans at Citi Futures.
Early Friday, July natural gas NGN17, +0.59% rose 3 cents, or 0.9%, at $2.92 per million British thermal units.
—Rachel Koning Beals contributed to this report.
About Oklahoma Minerals Founder GIB KNIGHT
Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma.