Price of oil tumbles Friday, is up for week

Faith Castro
September 11, 2017

Crude oil prices were mixed in Asia on Monday as investors focused on prospects of another extension for an OPEC-led oil cut into the middle of next year and as Hurricane Irma struck Florida with less force than feared. Brent crude oil, the global benchmark for the price of oil, holds a $5.80 per barrel premium over West Texas Intermediate, the USA benchmark for the price of oil. At settlement, Brent was $6.30 a barrel higher, with intraday trades indicating a larger premium versus WTI. Friday was the low.

Exxon Mobil Corp's 362,300-barrel-per-day (bpd) Beaumont, Texas, refinery which shut on August 30 due to flooding, may remain closed until the first week of October, sources familiar with plant operations said.

WTI is down $4.85 (9.27 percent) for the year and has an average price of $49.27 a barrel. The increasing numbers of operating rigs, as well as increasing production, have been raising concerns that the US shale oil producers which were able to cut their production cost dramatically over the past years are now a low-priced global competitor and would continue to undermine the OPEC agreement to cut supplies.

Hedge funds and other money managers increased their combined net long position in the five major petroleum contracts linked to crude, gasoline and heating oil by 46 million barrels in the week to September 5, according to the latest regulatory and exchange data.

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The Strategic Petroleum Reserve was tapped for 300,000 barrels, reducing stocks to 678.6 million barrels. The production has increased by 1.1 million barrels per day since bottoming around July 2016. American crude stockpiles rose by 4.58 million barrels last week, the first gain since June. However, it is trying to make a comeback on the new Saudi pledge to reduce exports by as much as a million barrels per day. Exports were 153,000 barrels per day, a steep drop of 749,000 barrels per day. When the value falls, commodity prices increase because more dollars are required to purchase the same quantity as when the value was higher. The Reporter-Telegram tracks WTI "all other areas" and West Texas sour. The growth consensus for non-farm productivity is 1.3%, compared to 0.9% in the previous quarter.

Futures added 0.5 percent in NY after falling 3.3 percent on Friday. The spread between WTI posted and sour has been $2.90 for the past five trading days. In the first half of this year, crude oil price declined by around 15 percent, which is its worst H1 showing in 19 years. The nearest contract in the $50s is December 2018 at $50.03.

Almost all the position changes came from WTI, where hedge funds became much less bearish about the supply situations as refineries began to restart.

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