Oil steadies but under threat from USA supply

WTI Crude Oil

South Korea's three oil commodity exchange traded funds (ETFs) have posted abysmal returns over the past month due to falling global crude prices, a fund evaluation firm said Tuesday.

The U.S. West Texas Intermediate crude August contract was at $43.30 a barrel by 8:50AM ET (1250GMT), up 29 cents, or around 0.7%.

Crude reached bear-market territory last week amid concern that the ongoing rebound in US shale production is derailing efforts by other major producers to rebalance the market. Next stop is 1 million barrels per day (mb/d), which Libya hopes to breach by the end of July. As Iran seeks to resume its market share to pre-sanction levels, and Libya and Nigeria look to resume their production loss due to disruptions, those three countries were exempted from the cut. The number of USA oil rigs in operation has hit its highest in over three years.

"Oil is trying to find its footing after last week's collapse", said Phil Flynn, senior market analyst at Price Futures Group. "And a slight support from a weak US dollar". "We might see a significant pop in short-covering if the USA inventory data turns out to be bullish", said Ric Spooner at CMC Markets.

The gains had additional support from bargain hunters who stepped in after crude futures. The benchmark was still set to end the first half of the year down almost 20 percent.

Weekly U.S. crude stockpiles peaked at a record 535.5 million barrels in the week ended March 31, according to EIA data.




"After how much we've fallen, prices are attractive here as a result, so it's not surprising that we're getting some buying, just on a valuation perspective". "The added cooling demand should limit the rate of [U.S.] storage injections in the weeks ahead".

"We don't think we're going to go below the low 40s".

"There is ongoing talk that [the Organization of the Petroleum Exporting Countries] has failed in that effort despite May compliance at 106% of the proposed cuts, which we'd rate as more of an unprecedented accomplishment than a disappointment", said Tim Evans, energy futures specialist at Citi Futures, in a daily note.

Also, U.S. shale oil output is up around 10 percent since previous year. While inventories have steadily declined, American oil production has climbed above 9.3 million barrels a day to the highest level since August 2015.

"Looking into the second half of 2017, we now doubt that demand growth will accelerate sufficiently", they wrote.

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