Oil prices fell on Friday and were set to get a weekly reduction as investors sought to book gains, despite tensions in the Middle East that have slashed supplies of crude.
Brent crude futures were down 47 cents at $56.76 a barrel at 0954 GMT. U.S. West Texas Intermediate (WTI) crude futures were at $50.75 per barrel, down 54 cents.
“There is a little bit of profit-taking,” Olivier Jakob, chief strategist at consultancy Petromatrix, stated.
“The market has been treading a little range all of this week with no legitimate momentum,” he added.
Oil exports from Iraq’s Kurdistan towards the Turkish port of Ceyhan were flowing at average prices on Friday of 216,000 barrels daily versus the typical flows of 600,000 bpd, a shipping source said.
Iraqi troops regained control of two significant oilfields northwest of Kirkuk from Kurdish Peshmerga forces this week, along with the oil ministry in Baghdad hopes to bring back the fields on stream on Sunday.
In a significant development, Russia’s largest oil company, Rosneft, has agreed to take control of Iraqi Kurdistan’s primary oil pipeline at a $1.8-billion investment.
The deal “makes it somewhat tougher for Baghdad to do anything contrary to these flows”, Jakob said.
Regardless of the losses on Friday, analysts say the sector is on a path towards rebalancing.
“The oil market has become small undersupply and we hope that this will persist at least through the end of the year,” U.S. investment bank Jefferies said.
U.S. commercial stocks of crude oil have dropped 15 percent from their March records, to 456.5 million barrels, below levels seen last year.
Part of the drawdown has been due to rising exports as a consequence of the steep reduction of U.S. primitive to Brent, making it attractive for American manufacturers to export their petroleum.
Furthermore, crude futures curves are in backwardation, making it attractive to market produced oil instantly instead of keep it for later dispatch.
Shipping data in Thomson Reuters Eikon indicates that overseas U.S. crude petroleum imports have jumped from virtually zero until the authorities loosened export restrictions in late 2015 to approximately 2.6 million bpd in October.
“Physical bottlenecks are not likely to kick in till waterborne (U.S.) exports strategy 3.2 million bpd,” RBC Capital Markets said.