Oil Bull Rally Wavers as Shale Boom Imperils Global Supply Drop

  • Market needs ‘steady, positive information’ to keep rallying
  • Futures fell after rising on surprise decrease in supplies

Oil Traders Prep for End of 'Lower for Longer' Era

Oil’s bull-market rally faltered as the shale boom still gives traders pause.

Futures fell 1.1 percent in New York after earlier reaching a five-month high. U.S. government data released Wednesday showed American drillers lifted output almost 9 percent during the past three weeks, the biggest three-week increase in half a decade. The exuberance of U.S. explorers may offset supply curbs by OPEC and allied producers such as Russia.

“If we see signs of U.S. production levels rising, the market is really vulnerable to a turnaround right now,” said Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut. “We’re probably going to see a softening here until we can see a real indicator that supply has come down.”

Oil has risen more than 20 percent since late June, the classic definition of a bull market, amid forecasts for improving demand, the return of U.S. Gulf Coast refiners after Hurricane Harvey, and Turkey’s threat to halt Kurdish crude shipments through its territory. The Organization of Petroleum Exporting Countries and Russia are urging fellow oil producers to honor promises to cut output, although the group has yet to decide on any extension of those curbs beyond March.

But in the U.S., even with some drillers idling rigs, explorers have large backlogs of drilled wells that have yet to be turned on, McGillian said.

“At these levels, today’s action is an indicator that the market needs to be fed steady, positive information to really continue the rally,” he said.

See also: It’ll Take Oil Above $50 for Shale Boom, Oil Sands to Pay Off

West Texas Intermediate for November delivery fell 58 cents to settle at $51.56 a barrel on the New York Mercantile Exchange.

Sanford C. Bernstein’s Neil Beveridge discusses energy, oil and the trade relations between the U.S. and China.

(Source: Bloomberg)

Brent for November settlement fell 49 cents to close at $57.41 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.85 to WTI.

Oil-market news:

  • Iraq said Turkey agreed to deal exclusively with its central government over exports of Kurdish crude oil, a step that could disrupt shipments from the independence-seeking Kurd region.
  • Libya’s oil output is rising again after disruptions ended at its biggest field, with production reaching about 950,000 barrels a day even as OPEC and allied suppliers step up efforts to contain a global glut.

— With assistance by Ben Sharples, and Rakteem Katakey

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