Oil trades near $44 as Goldman says Opec action insufficient

11/07/2017 16:03 AST

Oil erased earlier gains to trade near $44 (Dh161.61) a barrel in New York as Goldman Sachs Group Inc. warned Opec that it’s not doing enough to clear a surplus.

Futures slid 0.5 per cent after advancing 1.2 per cent earlier. Oil may slip below $40 unless there are sustained inventory declines and a drop in the rig count, according to Goldman Sachs. US crude stockpiles probably fell by 2.85 million barrels last week, a Bloomberg survey showed before an Energy Information Administration report Wednesday.

Oil is in a bear market amid concern that rising global supply will offset curbs by the Organisation of Petroleum Exporting Countries and its partners including Russia. US crude inventories remain more than 100 million barrels above the five-year average. The nation’s shale output can expand further with prices in the mid-$40s, according to JPMorgan Chase & Co.

“The market is still searching for a new equilibrium, and in particular for a lower band for the oil-price range,” said Jan Edelmann, an analyst at HSH Nordbank AG in Hamburg. Investor sentiment is “close to its lows,” which may cause a “renewed downswing in prices to sub-$40.” West Texas Intermediate for August delivery was at $44.18 a barrel on the New York Mercantile Exchange, down 22 cents, at 9:37am London time. Total volume traded was about 31 per cent above the 100-day average. The contract climbed 17 cents to $44.40 on Monday, advancing after a weekly loss.

Brent for September settlement was down 26 cents at $46.62 a barrel on the London-based ICE Futures Europe exchange, after rising 17 cents to $46.88 on Monday. The global benchmark crude traded at a premium of $2.24 to September WTI.

Evidence of further Opec actions could also help prices rally, Damien Courvalin, an analyst at Goldman, said in a note dated July 10. There’s another opportunity for the group to increase output cuts, but this should be done in a “shock and awe” manner, with little public announcement, he said.

Bloomberg