Oil prices rose about 1 percent on Friday, bouncing a bit from steep falls earlier in the week as a declaration of force majeure in the country prompted some buying in a market still worried about the global crude glut.
Brent crude oil was up 48 cents at $48.34 a barrel by 12:17 p.m. EDT (1617 GMT). U.S. crude was 39 cents higher at $46.04 a barrel. U.S. crude and Brent benchmarks remained on track for weekly declines of more than 3 percent, pressured by big U.S. inventories and heavy worldwide flows.
The Shell Development Company of Nigeria declared force majeure on Nigerian Bonny light crude oil after someone drilled a hole into the Trans Niger Pipeline, causing a leak.
Rebel activity and government mismanagement have frequently interrupted crude production in Nigeria, generally Africa’s largest oil exporter.
The leak shows “the production trend in Nigeria is far from stable,” said Carsten Fritsch, senior commodity analyst at Commerzbank.
Prior to that incident, oil markets had been under pressure in part because of evidence showing Nigeria and Libya, the two OPEC producers exempt from output cuts, were boosting production.
Last month the Organization of the Petroleum Exporting Countries and other key producers agreed to extend a November agreement to decrease production by almost 1.8 million barrels per day (bpd), and hold output there until the first quarter of 2018.
Libya’s 270,000-bpd Sharara oilfield has reopened after a workers’ protest and should return to normal production within three days, the National Oil Corp said on Friday.
“Libyan production is still very uneven, there´s no sign of any stable trend,” said Fritsch. He said Libya’s target of 1.25 million bpd was “wishful thinking,” saying 850,000-900,000 bpd by year-end was more realistic.
U.S. data this week showed a surprise 3.3-million-barrel build in commercial crude oil stocks to 513.2 million barrels. Inventories of refined products were also up, despite the start of the peak-demand summer season.
U.S. refined product inventories are now back above 2016 levels and well above their five-year range, reflecting an unexpected slowdown in U.S. demand, Jefferies said.
Asian markets are also oversupplied, with traders putting excess crude into floating storage, an indicator of a glut.
Thomson Reuters Eikon shipping figures show at least 25 supertankers sitting in the Strait of Malacca and the Singapore Strait, holding unsold fuel.
Those are similar amounts to May and April, indicating that even in Asia, with its strong demand growth, traders are struggling to clear inventories.
Later today,
– After oil drop, some OPEC delegates question if supply cut deal enough –
Two weeks after an OPEC-led deal to extend oil output cuts until March, some OPEC delegates are questioning whether the agreement will be enough to reduce a glut in supplies and lift prices.
Prices have fallen more than 10 percent to below $50 a barrel since the Organization of the Petroleum Exporting Countries and allies agreed on May 25 to prolong a deal to cut about 1.8 million barrels per day (bpd) until the end of March. The deal was initially due to run during the first half of 2017.
Even a political dispute between Gulf states, the source for most of OPEC’s crude, has failed to drive prices higher.
Instead, eyes are trained on Nigeria and Libya, two OPEC states that were excluded from the regime of cuts to help them recover from years of unrest that had hurt production. Both now report rising output.
This is adding to concerns among some in OPEC about the effectiveness of the accord to reduce output, whose impact is already being eroded by surging U.S. shale production.
One OPEC delegate told Reuters that a deal to curb production “without freezing Libya and Nigeria is useless.”
Nigeria’s exports are expected to reach a 15-month high in June of about 1.75 million bpd.
Libyan output has hit its highest since October 2014, rising above 800,000 bpd.
At the May meeting, OPEC discussed whether to assign output caps to Nigeria and Libya but agreed not to. The group also considered a larger production cut, an idea that it could revive in future, delegates have told Reuters.
A second OPEC delegate also said on Friday that it was not clear that the level of existing cuts was enough.
“It’s difficult to say. We hope so,” the delegate said. “We need to wait another month to see how it develops. There are a lot of factors involved.”
A third delegate said oil-market fundamentals were improving, indicating the current drop in prices was not driven by supply and demand but rather by speculators.
However, two other delegates said the oil price drop was temporary and the current supply cut pact was enough.
“It is not a cause for alarm – it is normal,” one of them said of the price fall, adding that he believed the market would still rebalance in the second half of the year.
Oil prices have recovered from below $30 a barrel in 2016, helped by the pact. But with the price hovering below $50 now, it is half its level of mid-2014 and less than the $60 top exporter Saudi Arabia has said it would like to see.