Oil Prices Climb Ahead of U.S. Inventory Report

The wild card for next year is US shale supply which appears to have reached a bottom but it's too early to say

The wild card for next year is US shale supply which appears to have reached a bottom but it's too early to say whether growth will resume. Bloomberg

SEB Markets chief analyst for commodities Bjarne Schieldrop said that such a deal would have a real and considerable impact on the oil market balance for 2017, potentially cancelling out any projected deficit.

JPMorgan said in its latest oil market outlook that "macro-economic risks may weigh on oil prices", although the USA bank added that oil prices would still likely rise between this year and the next as stocks are drawn down, and political risk and maturing oil fields tighten the market. It earlier hit a two-month low at $44.87.

US crude traded at $45.96 a barrel, down 64 cents or 1.4 per cent.

"Uncertainties and concerns over how Brexit will influence the market is expected to last for a long time, increasing volatility in oil prices", Will Yun, commodities analyst at Hyundai Futures in Seoul, told Bloomberg News.

Brent has recovered more than 80 percent from a 12-year low in January amid supply disruptions and falling US output.

Crude-oil prices strengthened Thursday as the prospect of a drawdown in USA crude inventories reinforced views that the global oil market is tightening.

NYMEX crude for August delivery CLc1 was up 5 cents at $49.04 a barrel, after closing up 66 cents, or 1.4 percent, on Friday. Nigeria pumped an average of 1.53 million barrels a day last month, an increase of about 90,000 a day from May, according to a Bloomberg survey.

Despite Wednesday's price advance, some traders and analysts cautioned about a glut of US gasoline oversupplies that could offset the bullish impact of crude drawdowns.

Brent for September settlement dropped 6 cents to $47.90/bbl on the London-based ICE Futures Europe exchange. The number of active rigs has plunged since late 2014 as prices fell to multiyear lows, but a recent rally from less than $30 a barrel to more than $ 50 has spurred some producers to put more rigs to work. The global benchmark is still up more than 80 per cent from a 12-year low close to $27 reached in January.

The Saudi state news agency reported that the country's energy minister agreed that the market is set to balance.

"After some days of declines in oil prices, US economic data and huge draws in oil inventories sent prices back upwards", said Michael Poulsen, oil analyst at Global Risk Management.

A Nigerian militant group that has been carrying out attacks on the country's oil pipelines claimed responsibility on Sunday for five new attacks.

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