NEW YORK (Reuters) - Oil prices rose on Friday after a pipeline stoppage in Nigeria, but crude still ended the week down nearly 4 percent on persistent worries about global oversupply.
Brent crude oil LCOc1 settled up 29 cents at $48.15 (37.84 pounds) a barrel. U.S. crude CLc1 futures rose 19 cents to $45.83 a barrel. Both benchmarks posted weekly declines of nearly 4 percent, pressured by big U.S. inventories and heavy worldwide flows.
“I don’t think it’s anything more than a temporary stabilization,” said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut, adding that traders were short-covering ahead of the weekend.
“The increases in production will still drag us lower,” he said.
The Shell Development Company of Nigeria declared force majeure on Nigerian Bonny light crude oil after someone drilled a hole into the Trans Niger Pipeline, causing a leak.
Nigeria has typically been Africa’s largest oil exporter but rebel activity and government mismanagement have caused slowdowns and stoppages.
The leak shows “the production trend in Nigeria is far from stable,” said Carsten Fritsch, senior commodity analyst at Commerzbank.
Oil markets have been under pressure in part because Nigeria and Libya, the two members of the Organization of the Petroleum Exporting Countries exempt from output cuts, were boosting production.
Last month OPEC and other key producers agreed to extend a November agreement to decrease production by almost 1.8 million barrels per day (bpd), and hold output there until the first quarter of 2018.
Libya’s 270,000-bpd Sharara oilfield has reopened after a workers’ protest and should return to normal production within three days, the National Oil Corp said on Friday.
U.S. production is also increasing. Drillers added eight oil rigs in the week to June 9, bringing the total count to 741, the most since April 2015, energy services firm Baker Hughes said on Friday.
U.S. data this week showed a surprise 3.3-million-barrel build in crude stocks to 513.2 million barrels. Inventories of refined products also rose, despite the start of the peak-demand summer season. [EIA/S]
“The drop (in gasoline demand) a week after Memorial Day demoralized the market,” said McGillian, referring to the late-May U.S. holiday weekend which marks the beginning of driving season. Americans have driven less than expected compared to this time last year.
U.S. refined product inventories are now back above 2016 levels and well above their five-year range, reflecting an unexpected slowdown in U.S. demand, Jefferies said.
Asian markets are also oversupplied, with traders putting excess crude into floating storage, an indicator of a glut. Thomson Reuters shipping figures show at least 25 supertankers sitting in the Strait of Malacca and the Singapore Strait, holding unsold fuel.
Additional reporting by Christopher Johnson in London, Henning Gloystein in Singapore; Editing by Adrian Croft and Richard Chang