Published: Wed, June 28, 2017
Finance | By Laverne Griffith

Oil little changed after three-day gain, supply glut weighs

Oil little changed after three-day gain, supply glut weighs

Producers of oil and gas weighed on Canada's main stock index as crude oil prices hit a seven month low with increasing concerns on market oversupply.

Global benchmark Brent crude futures rose $1.09, or 2.4 percent, to $46.92 by 12:23 p.m. ET (1623 GMT).

Brent for August settlement was 33 cents higher at $46.16 a barrel on the London-based ICE Futures Europe exchange.

The raises are suggesting that the market is somewhat looking optimistic so far this week after last month's losses.

Also, U.S. shale oil output is up around 10 percent since a year ago.

Hedge funds and other money managers seems to have lost optimism over the Organization of the Petroleum Exporting Countries' (OPEC) attempt to resolve the glut problem cutting earlier bets on crude futures and options.

On May 25, OPEC and non-OPEC countries agreed in Vienna to extend the existing level of oil production cut (1.8 mln barrels daily) until April 2018.

Despite the cuts, which started in January, markets remain well supplied due to rising output elsewhere.

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However US shale oil output is up around 10% since past year, while Nigeria and Libya, who are exempt from the Opec cuts, have also hiked output.

News from other markets show, an increase of 63 cents to $15.42 was observed in shares of Home Capital Group. USA crude drillers added rigs for a 23rd straight week, the longest stretch in at least three decades, according to data Friday from Baker Hughes Inc.

Traders and analysts said there was little fundamental news to justify more of a bounce in oil prices.

Analysts at Bank of America-Merrill Lynch said that while supply was a problem, demand had not grown quickly enough to mop up any excess output. "I suspect short covering", said Ric Spooner, chief market analyst at CMC Markets in Sydney. Brent advanced 0.6 %to $45.83 on Monday.

US crude futures were up 37 cents, or 0.8 percent, at $43.38 a barrel.

"Therefore, I tend to think $40 to $42 from a West Texas Intermediate point of view should be the lower end of the current range".

"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". We think we'll probably catch a bid a few weeks out from there. Non-OPEC nations must also cut production in order to reverse the supply glut. We do not have to look too far for likely culprits on the supply side.

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