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Oil pulls back after big jump on U.S. crude stock draw

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Reuters TOKYO
Last Updated : Sep 09 2016 | 1:28 PM IST

By Osamu Tsukimori

TOKYO (Reuters) - Oil prices pulled back on profit-taking on Friday after settling more than 4 percent higher a day earlier, following a surprisingly large drawdown in U.S. crude stocks as Gulf Coast imports slumped to a record low.

Brent and West Texas Intermediate crude futures have gained nearly 6 percent this week and are on course for their biggest weekly gain in three weeks following two consecutive weeks of declines, after major producers Saudi Arabia and Russia agreed on Monday to cooperate on stabilising the oil market.

London Brent crude for November delivery was down 58 cents at $49.41 a barrel as of 0647 GMT after rising above $50 for the first time in two weeks and settling up $2.01, or 4.2 percent, on Thursday.

NYMEX crude for October delivery was down 51 cents at $47.11.

Oil came under pressure after Morgan Stanley analysts said there is a risk of supply/demand rebalancing is being delayed.

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"We are not yet changing our forecast for a mid-2017 rebalancing, but our conviction level is falling," they said in a note. "Once again, we see an increasing probability for several unexpected bearish developments to come together, which could push off rebalancing (seasonally-adjusted demand exceeding supply) to late 2017 or even 2018."

Oil prices shot up on Thursday after government data showed U.S. crude stocks dropped 14.5 million barrels last week to 511.4 million barrels, the biggest weekly drop in stockpiles since January 1999.

Traders said imports fell as ships delayed offloading cargoes in Texas and Louisiana due to Tropical Storm Hermine.

Market participants said there was no significant impact from rising geopolitical risks after North Korea conducted its largest nuclear test, setting off a blast that was more powerful than the bomb dropped on Hiroshima.

The market is still focusing on an informal meeting by the Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia in Algeria from Sept. 26-28.

However, the oil options market indicates traders are not betting big on OPEC and rival Russia clinching a meaningful deal this month to control output.

Iran's steep oil output growth has stalled in the past three months, new data showed, suggesting Tehran might be struggling to fulfil its plans to raise production to new highs while demanding to be excluded from any OPEC deals on supply curbs.

(Reporting by Osamu Tsukimori; Editing by Subhranshu Sahu and Richard Pullin)

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First Published: Sep 09 2016 | 1:12 PM IST

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