By Barani Krishnan
And only concerns about the potential damage to oil refineries from Tropical Storm Barry managed to outweigh worries of a global supply glut in the making.
Oil prices were on track to sharp weekly gains on Friday as Barry headed for the Louisiana coast with a forecast to become a Category One hurricane that continued to threaten production in the Gulf of Mexico after cutting more than 1 million barrels a day – or half the region’s regular output.
New York-traded was up 21 cents, or 0.4%, at $60.41 per barrel by 1:12 PM ET (17:12 GMT).
London-traded , the benchmark for oil outside of the U.S., rose 34 cents, or 0.5%, to $66.86.
For the week, WTI was on track for a 5% rise, while headed for a 4% gain. The gains were also supported by the outsize U.S. drawdown of 9.5 million barrels in the week to July 5, versus forecasts for a draw of 3.08 million barrels. Oil was also helped this week by testimony from Federal Reserve Chairman Jerome Powell to Congress that all but confirmed an interest-rate cut later this month.
In Friday’ session, both WTI and Brent started the U.S. session on a somewhat wobbly footing after the International Energy Agency predicted the return of an oversupplied market next year despite OPEC’s production cuts being in full throttle.
The IEA’s “main message” was that the world had lived through a supply surplus of nearly 1 million barrels per day in the first six months of 2019 despite aggressive OPEC cuts. And the market is setting itself up for a second half glut as supply of U.S. shale is expected to continue ramping, it added.
Just a day ago, OPEC estimated in its July report that it will be producing about 560,000 bpd more than needed by next year, no thanks to the continued surge in U.S. shale oil output.
The report suggested that the Saudi-led OPEC and its key non-member ally Russia might be cutting production indefinitely beyond its currently set deadline of March 2020.
“As an observation, the usual result that I see in a bull run are lot of bulls,” said Scott Shelton, energy futures broker at ICAP (LON:) in Durham, N.C. “This one feels different.”
“It feels like the market is not a believer of this rally. They look at the (first-half) data like the IEA and are not believers. I started the week ‘not believing’ either, but the consensus bearishness with the market on its recent highs and CTAS (commodity trading advisors) still short makes me wonder if there is another $2-$3 to go on WTI and Brent. The only length I see in the market for any significant size is gasoline. Perhaps there is ‘more to go’.”
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