Singapore: Oil headed for a sixth weekly advance as renewed speculation that Middle East shipments may be disrupted amid Saudi-led airstrikes in Yemen shifted focus from the expanding US glut.
Futures were little changed in New York and are up 3% this week. Raids by a coalition of mostly Sunni Muslim nations against Shiite rebels marked an escalation of the civil war in Yemen, a country near major oil fields and adjacent to key shipping routes. While US crude stockpiles are at an 85- year high, data on Wednesday showed the nation’s output slid for a second week amid a drop in drilling activity.
Oil is rebounding from a six-year low in March amid speculation the drilling slowdown and improved fuel demand will help drain a market’s oversupply. Vitol Group, the world’s biggest independent oil trader, said this week that crude prices won’t fall below $50 a barrel for sustained periods.
“I still expect the market is too high, we’re seeing a bit of over-reaction," said Takashi Hayashida, the chief executive officer of Elements Capital Inc., a Tokyo-based hedge fund that focuses on energy and commodities. “We may have a rise for another week or two while the Yemen strikes last, and then there should be a correction."
West Texas Intermediate (WTI) for June delivery was at $57.43 a barrel in electronic trading on the New York Mercantile Exchange, down 31 cents, at 11:21 am Singapore time. The contract rose $1.58 to $57.74 on Thursday, the highest close since 12 December. Prices are poised for the longest stretch of weekly gains since February 2014. Total volume was about 58% below the 100-day average.
Brent for June settlement was 29 cents lower at $64.56 a barrel on the London-based ICE Futures Europe exchange. It climbed $2.12 to $64.85 on Thursday. The European benchmark crude traded at a $7.15 premium to WTI.
Fighter jets from a Saudi-led coalition attacked Houthi rebel militia and troops allied with former Yemen President Ali Abdullah Saleh in the north of Aden, a southern port city, the Saudi-owned Al Arabiya television channel reported on Thursday. The kingdom’s ambassador to the US said the alliance may continue airstrikes and still doesn’t rule out sending ground troops.
Yemen lies on one side of the Bab el-Mandeb strait, the world’s fourth-busiest oil trading chokepoint, according to the Energy Information Administration. An estimated 4.7 million barrels a day of crude and products were shipped through the waterway last year, up from 3.8 million in 2013, it said in a newsletter.
“There appears to be a bit of a focus on Saudi Arabia’s renewed strikes in Yemen," Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone. “Another key factor is the ongoing expectation of lower US oil production levels."
Crude output decreased by 18,000 barrels to 9.37 million barrels a day last week, according to the EIA. Supply from shale formations will shrink in May, the Energy Department’s statistical arm said on 13 April, the first time the agency forecast a decline since it began publishing a monthly drilling report in 2013.
Crude stockpiles increased by 5.3 million barrels to 489 million through 17 April, the highest level in weekly EIA data that started in August 1982. Supplies haven’t been this high since 1930, according to monthly records dating back to 1920.
Nineteen of 41 analysts and traders, or 46%, were bearish on WTI, a weekly Bloomberg survey on Thursday showed. Eleven were bullish while the rest were neutral. Bloomberg