Oil edges up in choppy trade on signs of higher demand
London — Oil prices edged higher in volatile trading on Friday as signs of strengthening demand was offset by still-high global stocks and concerns about economic growth.
Benchmark Brent and US WTI crude oil contracts were on track for weekly gains, but fluctuated between intraday gains to losses amid conflicting signals on the supply/demand picture.
Brent crude futures, the international benchmark for oil, were up 48 cents at $48.90 per barrel at 1.38pm GMT, after trading as much as 64c higher and 27c lower.
US West Texas Intermediate (WTI) crude futures were at $46.58 per barrel, up 50c, after trading between 64c higher 28c lower earlier in the day.
"It’s been a jumpy Friday in the oil market," said Ole Hansen, head of commodity strategy with Saxo Bank, adding that the volatility was "primarily driven by traders covering what up until recently was an extended short position."
Prices spiked earlier in the day following a force majeure declaration on exports of Nigeria’s Bonny Light crude, but sank into negative territory after data showed US retail sales unexpectedly fell in June, casting doubt on demand in the world’s largest oil consumer.
Both contracts were roughly 5% above the week’s lows, aided by reports of accelerating demand growth from the International Energy Agency (IEA), crude oil import growth in China and falling crude stocks in the United States.
China’s crude oil imports over the first six months of 2017 were 13.8% above the same period in 2016, customs data showed. Asian traders are selling oil products out of tanks amid soaring demand, while the EIA reported the largest drop in US crude oil inventories in the week to last week in 10 months.
Analysts at Commerzbank said a reduction in the developed world’s oil stocks was likely to continue "so long Opec does not significantly increase its output any further".
Still, oil stocks remained comfortably above the five-year average, and prices are more than 16% below their 2017 highs, despite an extension to March 2018 of output cuts of 1.8-million barrels per day (bpd) coordinated by the Organisation of the Petroleum Exporting Countries.
Opec’s rebalancing effort has been stymied in part by rising output from Libya and Nigeria, which are exempt from the cuts, but June compliance among other members also fell to just 78%, according to the IEA.
"It’s not too long before the market starts looking at the supply situation ... which is anything but encouraging," PVM Oil Associates analyst Tamas Varga said.