NEW YORK, JULY 1, 2016 – Oil prices steadied on Friday from early losses, with traders citing potentially more bullish investor positioning for the second half of the year and after a weaker dollar that boosted most commodities.
The market also found some support after falling more than 3 percent on Thursday as traders booked profits at the end of the best quarter in seven years. Crude prices had jumped 25 percent over the past three months.
Volumes in key Brent and U.S. crude futures were significant for New York’s morning trade despite the hesitation typically common before a long weekend. U.S. financial and commodity markets will be closed on Monday for the Independence Day holiday.
“Oil has settled down after the initial short covering squeeze earlier in the week,” said Ole Hansen, commodity strategist at Saxo Bank in Copenhagen.
“A rising contango indicates that the market is getting ready to absorb returning supply from Nigeria and Canada.”
Militant attacks in Nigeria had brought production to the lowest in 30 years but no new attacks have been carried out since June 16, allowing production to slowly ramp up.
In Canada, oil sands output was also gradually increasing after wildfires had curtailed production. As of Wednesday, around 400,000 barrels per day of production were still affected in the Fort McMurray area.
Adding to oversupply concerns, a Reuters survey showed OPEC production rose to a record high in June. Stronger supply from major Middle East producers, except Iraq, underlined their focus on maintaining market share.
Despite growing signs of lingering oversupply, U.S. Energy Secretary Ernest Moniz said on Friday he expected oil supply and demand to balance by 2017.
Analysts at Barclays took a different view, cutting their crude price forecasts on the back of expectations for reduced economic growth and oil demand following Britain’s vote to leave the EU.
The bank trimmed its Brent and WTI price forecasts for 2016 by $3 each, to $44 and $43 a barrel.
“Markets have experienced only the tip of the iceberg in terms of the impact of the UK’s ‘leave’ vote,” analysts said in a note.
