Oil Edges Up Above $46 as Saudi Arabia Sees Supply Glut Easing

  • Crude stockpiles to fall faster over coming months: Al-Falih
  • EIA sees U.S. shale-oil output in July rising to record

Oil Extends Gains as Saudis See Global Glut Drop

Oil edged up following its plunge last week after Saudi Arabia and Russia said crude markets will rebalance.

Futures rose 0.6 percent in New York after Saudi Energy Minister Khalid Al-Falih said inventories are declining and reductions will accelerate in the next three to four months. Still, the price increase didn’t come close to recovering the 3.8 percent loss last week as investors focused on soaring U.S. stockpiles.

“Sentiment in the market is still very bearish,” Amrita Sen, chief oil economist for Energy Aspects Ltd. in London, said by telephone. “We are starting to see stock draws, but the market is kind of saying, the draws aren’t coming fast enough.”

Oil has traded below $50 a barrel amid speculation increased U.S. supplies will counter production curbs by the Organization of Petroleum Exporting Countries and allies including Russia. American explorers added oil rigs for the 21st straight week to the highest level since April 2015, according to Baker Hughes Inc. Output at major U.S. shale plays will reach a record 5.48 million barrels a day in July, according to the Energy Information Administration.

While comments from Saudi Arabia and Russia do add some positive sentiment to the market, “nobody really believes them at face-value anymore,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. “People aren’t taking the bait.”

West Texas Intermediate for July delivery rose 25 cents to settle at $46.08 a barrel on the New York Mercantile Exchange, paring gains from as high as $46.71 during the session. Total volume traded was about 4 percent below the 100-day average.

See also: America’s Stubborn Oil Supply Glut Catches Hedge Funds Off Guard

Brent for August settlement climbed 14 cents to settle at $48.29 a barrel on the London-based ICE Futures Europe exchange. Prices lost 3.6 percent last week. The global benchmark crude traded at a premium of $1.97 to August WTI.

Oil Allocations

Global crude inventories will settle at their five-year historical average -- OPEC’s target -- before the end of the year, Al-Falih said at a briefing in Kazakhstan with his Russian counterpart, Alexander Novak. Still, Saudi Arabia, the group’s biggest producer, may modify its policy if output cuts don’t have the desired effect, he said.

Saudi Arabia’s oil allocations to customers will be cut for July by about 600,000 barrels a day from June, according to a person with knowledge of the matter who asked not to be identified because the information is confidential. U.S. July oil allocations are said to be reduced by 300,000 barrels a day.

Data from the EIA last week showed that total U.S. crude and product stockpiles jumped by the most since 2008 in the week ended June 2.

Oil-market news:

  • Libya revived output to 820,000 barrels a day, from 618,000 last week, after restarting its Sharara oilfield, according to person with direct knowledge of the matter.
  • Qatar, the focus of a diplomatic dispute with Saudi Arabia, is committed to production cuts under the OPEC-led agreement, according to Qatari Energy Minister Mohammed Al Sada.
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