Oil prices are flat on weak US demand
New York — Oil prices were flat on Friday in see-saw trade, under pressure from weak US demand but drawing support from a sharp decline in Iraqi crude exports due to tensions in the Kurdistan region.
US light crude was 10c higher at $51.39. Brent crude was up 24c at $57.47 a barrel by 3.44pm GMT.
"We’ve continued to see signs that the market needs a steady drumbeat of positive information," said Gene McGillian, director of market research for Tradition Energy. "This week’s department of energy report where petrol demand dropped to its lowest since March gave a little pause to that."
Oil exports from Iraq’s Kurdistan via the Turkish port of Ceyhan were flowing at average rates of 216,000 barrels per day (bpd), down from the usual flows of around 600,000 bpd, a shipping source said.
Iraqi troops regained control of two major oil fields northwest of Kirkuk from Kurdish Peshmerga forces this week, and the oil ministry in Baghdad expects to bring the fields back on stream on Sunday. Russia’s biggest oil company, Rosneft, has agreed to take control of Iraqi Kurdistan’s main oil pipeline in a $1.8bn investment.
Olivier Jakob, chief strategist at consultancy PetroMatrix, said the deal with Rosneft "makes it a bit harder for Baghdad to do anything against those flows".
Analysts said the market was on a path towards re-balancing. "The oil market has moved into modest under-supply and we expect this will persist at least through the end of the year," US investment bank Jefferies said.
US commercial stocks of crude oil have dropped 15% from their March records, to 456.5-million barrels, below levels seen last year. Part of this drawdown has been due to rising exports as a result of the steep discount of US crude to Brent, which makes it attractive for American producers to export their oil.
Crude oil for immediate use now carries a premium over forward futures, making it profitable to sell oil produced now rather than storing it for sale later.
Shipping data in Thomson Reuters Eikon shows that overseas US crude oil shipments have soared from virtually zero before the government loosened export restrictions in late 2015 to about 2.6-million bpd in October.
Said RBC Capital Markets: "While outbound shipments recently approached 2-million bpd, our maths suggests that physical bottlenecks are unlikely to kick in until waterborne exports approach 3.2-million bpd."