Oil prices lost further ground in early trading on Friday as the market continued to be rocked by data showing US crude stockpiles had surprised on the upside.
Brent crude oil futures were down by 0.80% early on Friday, trading at around $47 per barrel, following a 0.42% fall on Thursday. Brent plummeted by 4.11% on Wednesday after US crude inventories climbed by 3.3m barrels to 513.2m barrels, defying expectations for a decline in stockpiles.
Nevertheless, there were signs that certain investors were feeling more bullish on the prospects for oil further out. Options trades on Wednesday indicated that one big investor was expecting oil to reach $80 per barrel by December.
It´s been a volatile few days for oil, having been boosted early in the week by news that a Saudi-led coalition had taken the unprecedented step of severing diplomatic and economic ties with Qatar. Brent crude futures had initially jumped by 1.6% to $50.74 per barrel on the news.
However, the latest increase in US crude inventories is a significantly bearish factor for the market. It follows the record high US crude stockpiles reported earlier this year that served to counteract the bullish impact from OPEC´s agreement to cut oil production.
While OPEC members are keen to cut back output to lift prices, North American oil firms already appear to be set on ramping up their own domestic production.
On Wednesday, one investor was understood to have paid half a million dollars to take options positions that will be in profit if Brent crude surpasses the $80 per barrel mark in December.
Exchange data showed that the options were purchased in two trades to buy a total of 10 million barrels of Brent crude. The options cost 5 cents per barrel.
While the level of US inventories will be a key factor in the direction of the market this year, any escalation of tensions in the Middle East has the potential to boost prices.