Singapore — Oil prices dipped on Friday as part of a broad-based sell-off across markets, and despite signs that crude markets are gradually tightening.
Brent crude futures, the international benchmark for oil prices, were at $51 a barrel at 4.14am GMT, down 3c from their last close. Brent is set for a 2.2% drop this week, the most the week ending July 7.
US West Texas Intermediate (WTI) crude futures were at $47.06 a barrel, also down 3c. WTI is also set to drop for the week, down 3.6%, and also the most since the week ending July 7.
Oil traders said the crude falls came amid a sell-off across many other markets, including US and Asian stocks, where investors voted with their feet amid growing scepticism US President Donald Trump, embroiled in controversy, would achieve his economic agenda.
The falls came despite signs, especially in the US, that crude markets were gradually tightening.
Despite a 13% jump in production since mid-2016 to 9.5-million barrels a day, the country’s commercial crude inventories have fallen 13% from their March records to below 2016 levels.
"EIA [Energy Information Administration] data showed that stockpiles fell by 8.95-million barrels to 466.5-million barrels last week. This was the biggest weekly fall since September," ANZ bank said on Friday.
Going forward, much will depend on output levels from oil cartel Opec, which, together with non-Opec producers like Russia, has pledged to restrict output by 1.8-million barrels a day between January 2107 and March 2018 to tighten the market and prop up prices.
So far, Opec and Russian output remains high as some members who have pledged to cut are not complying with their targets.
On the demand side, Asia in particular could see some stronger crude orders going into the second half of the year, resulting in a tighter market.
Driven by the start up of a new refinery in Yunnan province in southern China and the completed expansion of a fuel processing facility at Huizhou, analysts said they expected Chinese crude oil imports to pick up in the second half of the year.
"We expect Chinese crude imports to increase by 700,000 barrels a day year on year on average in [the second half of] 2017," energy consultancy FGE said.
New oil demand is also coming from Vietnam, which will see record crude oil imports in August as it readies its second refinery for start up.
"As domestic crude production continues to fall, Vietnam’s historical surplus in crude oil will come to an end by 2019, turning the country into a net importer of crude," said Peter Lee, oil analyst at BMI Research.
Reuters
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