Oil prices drop 3 percent as investors retreat from overnight gains
Oil prices fell nearly 3 percent in Asian trade on Tuesday, with investors covering short positions and taking profits after Brent and U.S. crude soared more than 8 percent in the previous session.
Both Brent and U.S. crude prices dropped nearly $2 a barrel shortly after trading in Brent started on Tuesday, before partly recovering later in the session.
“A lot of the fall was due to short-covering,” said Ben Le Brun, market analyst at Sydney’s OptionsXpress.
“There could be a bit of profit-taking for people who have gone long.”
U.S. crude, also known as West Texas Intermediate, had climbed 27.5 percent by the end of three days of gains in the previous session, the largest three-day increase in dollar terms since February 2011 and the biggest percentage increase over three days since August 1990.
The surge was fueled by an OPEC commentary saying the cartel was willing to talk to other producers to achieve reasonable oil prices, as well as by the downward revision of U.S. output data by the U.S. Energy Information Administration (EIA).
“(The OPEC comments) could be just a bit of politicking … but it does suggest that many producers are likely to be hurting at these levels,” ANZ said in a market report on Tuesday.
OPEC’s indications about possible cuts could be the cartel’s way of dealing with increased Iranian crude exports once sanctions are lifted, Phillip Futures said in a note on Tuesday.
Revised EIA data published on Monday showed U.S. domestic oil production peaked at just above 9.6 million barrels per day (bpd) in April before falling by more than 300,000 bpd over the following two months.
U.S. commercial crude stocks fell by 1.5 million barrels to 449.3 million barrels last week, according to a Reuters poll of analysts on Monday taken ahead of U.S. industry and government data.
Despite the fall in U.S. production the global oil market is still oversupplied with oil and a decline in U.S. production is increasingly likely in 2016, Morgan Stanley said in a report on Tuesday.
Brent crude for October delivery had dropped $1.47 to $52.68 a barrel, or 2.7 percent, as of 0536 GMT after climbing $4.10, or 8.2 percent, in the previous session. It dropped by $1.99 a barrel earlier in the session.
U.S. crude for October delivery dropped $1.43, or 2.9 percent, to $47.77 a barrel, after it settled up $3.98, or 8.8 percent in the previous session. It earlier dropped by $1.97 a barrel.
Investors will be watching key U.S. data, including oil stocks, manufacturing and vehicle sales figures, later on Tuesday to give further direction to prices.
That comes after official data from China on Tuesday showed its manufacturing sector contracted at its fastest pace in three years in August, reinforcing concern over the health of the world’s second-largest economy.
EIA improves monthly reporting of crude oil production
With the release of the Petroleum Supply Monthly (PSM) later today, EIA is incorporating the first survey-based reporting of monthly crude oil production based on an expansion of its survey program earlier this year. Today’s PSM includes EIA’s first reporting of June crude oil production. EIA also begins using new survey data from multiple states and regions within the United States, and revises figures previously reported for January through May 2015.
EIA estimates U.S. crude oil production in June 2015 at 9.3 million barrels per day (b/d), a decrease of approximately 100,000 b/d from the revised May 2015 figure. Production estimates released in the PSM for January through May were revised downward by 40,000 b/d to 130,000 b/d. The largest revisions in volume include decreases of oil production in Texas (ranging from about 100,000 b/d to 150,000 b/d) and increases in the federal Gulf of Mexico (ranging from about 10,000 b/d to 50,000 b/d). U.S. crude oil production for the first six months of 2015 averaged 9.4 million b/d. Source: EIA
Source: Reuters – Oil prices drop 3 percent as investors retreat from overnight gains
