Oil prices ‘retreat’ from 2016 highs during week – Global growth concerns return to the fore

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LONDON, June 11, (AFP): A combination of tighter supplies and a downbeat dollar sent oil prices surging to fresh 2016 high points this week, before they dropped on worries over the global economic outlook.

Crude futures rallied for most of the week, resulting in world benchmark oil contract Brent North Sea crude reaching an eight-month high at $52.86 a barrel on Thursday.

At the same time, US contract West Texas Intermediate (WTI) hit $51.67 a barrel — a peak since July 2015.

“A three-day winning streak came to an end yesterday,” said oil brokers PVM in a note to clients published on Friday.

“The softer tone across energy markets weighed on global equities which also saw their recent run of gains grind to a halt as growth concerns returned to the fore,” they added.

Despite Friday’s losses, oil prices have almost doubled since hitting near 13-year low points at the start of the year, helped by an easing supply glut as output falls in Nigeria because of unrest and in Canada owing to the country’s wildfires.

Oil has surged in recent months, also on a drop in the US currency that has made dollar-denominated crude cheaper for holders of rival units.

Prior to the strong rebound, oil futures at the start of the year hit their lowest points since the end of 2003. This was after a sustained months-long drop in prices from around $100 a barrel because of a global supply glut.

However supplies are beginning to ease and on Wednesday government data revealed that crude commercial stockpiles dropped by 3.2 million barrels in the United States, the world’s biggest oil-consuming nation.

And analysts said US energy inventories as a whole could fall further as the world’s biggest economy advances towards its peak driving season when Americans hit the roads for their summer vacations.

Meanwhile in Canada, the biggest supplier of oil to the US, the chances of output picking up in the near term are slim after wildfires shut production facilities in its main oil producing region of Alberta.

Supplies are also falling in OPEC member Nigeria, where on Friday a Niger delta militant group claimed a fresh attack on a pipeline operated by the Nigerian subsidiary of Italy’s Eni in the restive oil-producing south.

The upsurge in unrest has reduced Nigeria’s output to 1.6 million barrels per day, well below the budgeted-for 2.2 million bpd.

That has heaped further pressure on government revenues already hit by the global fall in crude prices since mid-2014.

The impact of the sharp falls has been felt also by energy majors across the world, with Russian oil giant Rosneft on Wednesday reporting an 80-percent drop in net profits for the first quarter.

And on Friday, industry body Oil & Gas UK said jobs supported by the country’s offshore energy industry will have fallen by an estimated 120,000 by the end of the year compared with around two years earlier owing to the slump in crude prices.

Around 1245 GMT on Friday, Brent North Sea crude for delivery in August stood at $51.16 a barrel, down 79 cents compared with Thursday’s close.

US benchmark West Texas Intermediate lost 77 cents to $49.79 a barrel.

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