Oil futures opened at a counter-intuitive high at $50.58 on the Chicago Mercantile Exchange even as a report yesterday said that crude supplies rose for the first time since the end of August. Crude oil November futures hit a high of 51.14 by mid-Friday morning on the CME.
November WTI was up 26 cents to $50.44 on the NYMEX at the close of trading yesterday. December Brent crude closed at $52.03, up 22 cents on the London ICE Futures Exchange.
A Thursday report by the U.S. Energy Information Administration (EIA) found that domestic crude supplies rose by 4.9 million barrels during the week ending October 7. A 250,000 barrel spike was expected by S&P Global Platt's on Wednesday. The American Petroleum Institute reported a spike of 2.7 million barrels late Wednesday. A key question for traders will be the impact of the EIA number and whether or not the OPEC deal struck by member nations last month to cut production will hold.
Iran, Libya and Nigeria are expected to be exempt from the production cuts. Russian and U.S. producers will be the wild cards.
Apart from short-term market fluctuations, Jeffery Halley a senior analyst at currency trader and forex data vendor OANDA told Reuters, "the reality is that the world is pumping more oil than it uses."
Thomson Reuters Eikon data reveals that U.S. rigs that were drilling for new production has gone up since May. U.S. shale and rig counts are expected to drive a future oil glut.
Also this week, Morgan Stanley said it expected Brent prices to go up from a 2016 average of $51 in 2017 and to a $70 average in 2018.