Oil seen extending losses
Multinational 
LONDON, June 16, 2017 – Oil prices, near seven-month lows, may soon hit the longest streak of weakly losses in almost two years, international media reported on Friday.
Brent futures for August delivery were up about 1% in London at 11.59 am, at USD 47.36 per barrel, but more and more traders are having to hire obsolescent supertankers in order to store their excess oil, in yet another sign of the lingering glut, Reuters reported.
Even an EIA report released on Wednesday, showing that US crude inventories declined by 1.7 million barrels last week, failed to calm the markets. While the EIA data contradicted an earlier API report, which said that the inventories had risen by 2.8 million barrels, it also showed that petrol stocks went up 2.1 million barrels. Overall stocks remain some 100 million barrels higher than the five-year seasonal average.
“There is really no bullish twist to the latest U.S. data,” Michael Dei-Michei, an expert at consultancy JBC Energy, told Bloomberg.
“Implied crude production seems to have moved upwards at a rather rapid pace, U.S. gasoline demand has taken a turn to the downside just as the summer driving season starts and total U.S. oil stocks have not drawn for two weeks.”
Ironically, one of the first victims of the downturn could be US shale producers, a major driving force behind the glut.
While their production costs are much higher than those at conventional plays such as Saudi Arabia’s, these firms have more than doubled their rig count in the past year, adding 425 new rigs since May 2016, Baker Hughes data shows.
Many rely on hedges to help guarantee their profits this year. However, a Reuters tally found that most have cut back on hedges for next year. Some 12% of their 2018 output has been hedged as opposed to 40% of their 2017 production, a Morgan Stanley note quoted by the agency said.
Analysts say that a continued slump would put to test the US shale producers’ claims that they can remain profitable at oil prices of less than USD 50 per barrel.
“Eventually the reduction of both spot and forward prices should curb the drilling boom, which will in turn provide a floor for oil prices,” John Kemp wrote in a Reuters analysis.
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