MW: Oil prices pull back, but stay on track for weekly gains
Oil prices pulled back Friday, but remained on track to end the week higher as traders continued to focus on the prospect of supply disruptions.
Production outages around the world have fueled gains in oil prices in recent weeks, chipping away at the oversupply that has plagued the market for nearly two years. Wildfires in Canada have taken some oil fields there out of commission, while disruptions in Nigeria and Libya have also given prices a lift.
“Supply currently only just covers demand due to high production,” said Barbara Lambrecht, analyst at Commerzbank.
But oil pulled back from earlier gains. Brent crude LCON6, -0.49% the global oil benchmark, fell 22 cents, or 0.5%, to $48.58 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate CLM6, -0.35% futures fell 15 cents, or 0.3%, to $48.71 a barrel. For the week, Brent is up 1.6% while WTI is gaining 4%.
The fires in Canada’s oil-rich Alberta province have affected as much as 1.4 million barrels a day of production, estimates Jason Gammel, analyst at Jefferies. Meanwhile, attacks in Nigeria are taking out close to half a million barrels a day, he said.
Oil prices retreated earlier in the week as the dollar rallied following indications that the U.S. Federal Reserve could launch another round of rate increases at its next meeting in June. That strengthened the greenback, which tends to push oil prices lower by making the dollar-denominated commodity more expensive for holders of other currencies.
On Friday, the dollar was little changed. The Wall Street Journal Dollar Index BUXX, +0.02% , which tracks the greenback against a basket of other currencies, was down 0.02%.
Read: Five reasons why the U.S. dollar will get stronger
Later in the day, traders will also look to the latest U.S. oil rig count, which is as a rough proxy for activity in the industry. Last week, Baker Hughes Inc. BHI, -1.55% , which tracks the data, said the number of rigs drilling for oil fell by 10 to 318. There are now over 70% fewer rigs, from a peak of 1,609 in October 2014.
However, with prices now at levels that make drilling economical for some firms, the rig count might start rising soon and the U.S. production declines might slow. This could in turn threaten the price recovery, analysts say.
Nymex reformulated gasoline blendstock RBM6, -0.99% —the benchmark gasoline contract—fell 1% to $1.6189a gallon. ICE gasoil changed hands at $439.50 a metric ton, up $10 from the previous settlement.
