A worker checks the valves at Al-Sheiba oil refinery in the Iraq city of Basra. File Picture: REUTERS/ESSAM AL-SUDANI
A worker checks the valves at Al-Sheiba oil refinery in the Iraq city of Basra. File Picture: REUTERS/ESSAM AL-SUDANI

Singapore — Oil traded steady on Friday, although it was set for its biggest weekly drop in about a month over the doubt that an Opec-led production cut will restore balance to a market that has been dogged by oversupply for more than two years.

Brent crude futures were at $52.99 a barrel at 3.23am GMT, flat from their last close. Brent futures are set for a 5.2% weekly drop, the most since the week of March 10.

US West Texas Intermediate (WTI) crude futures were also almost unchanged, at $50.74 a barrel. WTI is set for a 4.6% weekly decline, also the most since March 10.

Reuters technical analyst Wang Tao said WTI had support just above $50 a barrel, while Brent had support around $52.55.

The stable prices on Friday followed a more than 3.5% fall in both benchmarks earlier this week as doubts emerged over the effect of an effort led by oil cartel Opec to cut production by almost 1.8-million barrels a day during the first half of the year.

Thomson Reuters Eikon data show that a record 48-million barrels a day of crude is being shipped across ocean waters in April, up 5.8% since December, before cuts were implemented.

The market is taking note: The value of the entire Brent forward curve has slumped steadily since the start of the Opec-led cuts in January. The two-year calendar strip for Brent futures, or the average of all contracts over that period, is down by more than $4 since January to about $54.15 a barrel.

The high supplies are in part a result of other producers, who have not agreed to cut output, increasing exports.

"The resurgence of US shale continues to sabotage ... efforts to stabilise the saturated markets," said Lukman Otunuga of futures brokerage FXTM.

US production has jumped almost 10% since mid-2016 to 9.25-million barrels a day, close to the world’s top two producers, Saudi Arabia and Russia.

The CE of France’s oil major Total warned this week that prices could fall further due to rising US production.

Attempting to prevent a further ballooning in supply, some Opec producers, including Saudi Arabia and Kuwait, are lobbying to extend the pledge to cut production beyond June.

To determine the health of oil markets, analysts say it is important to monitor inventory levels.

Yet outside the US, where data still show bloated inventories, reliable information is difficult to come by.

There are signs that inventories around Asia’s oil trading hub of Singapore have fallen, although it is not clear whether this is to meet strong demand, or if this is to make space in anticipation of more supplies coming.

Reuters

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