Despite the July 4th Independence Day holiday that will keep U.S. trading subdued this week, traders are actively eyeing the U.S. oil inventories with the hope that signs of reduced supply will finally buoy prices. The summer has historically seen reduced oil output with the U.S. Energy Information Administration noting that crude oil inventories have fallen by an average of 2.9 million barrels per week in July. Demand for oil also tends to be significantly higher in July as it is considered to be peak driving season.
This year, in addition to increased demand due to travel during the Independence Day holiday, increased interest from Japan and South Korea for U.S. oil could help reduce the oversupply and bring prices slightly higher, as will a reduction in U.S. drilling activity in June, the first time that the U.S. has scaled back its production since January. While some traders are optimistic about this possibility, others are concerned that a recovery of Libyan and Nigerian supplies and production have kept the surplus at over 3 billion barrels too much to help reign in prices. Libya and Nigeria were exempted from OPEC’s production cuts and have contributed to a rise in OPEC’s output in June, regardless of the organization’s commitment to cutting production. Several banks have cut their outlook for oil prices in the second half of 2017, saying that despite OPEC’s guaranteed production cuts the surplus is still substantially higher than it should be.
U.S. WTI crude futures were up 0.30 percent to $46.17 per barrel at 2:47 a.m. GMT on Wednesday. Brent crude futures gained 0.12 percent to trade at $48.83 per barrel. In the first half of 2017 whose trading ended last Friday, U.S. crude future have posted their biggest loss in 19 years.