Oil Prices Edge Down Amid Little-Improved Supply Picture
Oil prices edged down Monday, extending last week’s decline, as traders returned from a long holiday weekend to a market with little improvement in supply-and-demand conditions.
The benchmark U.S. contract fell 0.2% to $39.39 a barrel on the New York Mercantile Exchange, while the Brent contract lost 0.4% to settle at $40.27 on the ICE Futures Europe exchange. European trading was light due to the extended Easter weekend holiday there.
Analysts said the 50% surge in crude prices since early February hasn’t been accompanied by a tandem improvement in market fundamentals, with some saying the market could be seeing the beginnings of a retreat from recent highs above $40 a barrel. The market suffered its fourth straight losing session, now off 5.1% from its 2016 high set a week ago.
“Increasingly bearish fundamental balances are highly visible,” research consultancy Ritterbusch and Associates said in a note.
Much of the rally has been built on the expectation that major producers including Saudi Arabia, Russia and others would cap output at January levels when they meet next month in Qatar, but skepticism is growing that it would do little to alleviate the global supply glut estimated to be growing at one million barrels a day.
Australian bank Macquarie said in a note that it sees crude prices falling back to $30 a barrel and noted a host of forthcoming risks weighing on the market, including increased exports from Iran, Iraq, Saudi Arabia and Nigeria, rising investor outflows from crude-linked exchange-traded funds, and a strengthening dollar.
“The current oil price recovery has occurred against a backdrop of weak fundamentals,” the firm said.
The rise has also been accompanied by financial investors in the market such as hedge funds slashing so-called short bets that profit when prices fall, while only marginally increasing bullish bets that prices would rise. Data from the U.S. Commodity Futures Trading Commission released Friday showed bearish positions were cut 28% last week, but bullish positions increased just 2%.
The market was overshadowed last week byWednesday’s bearish report from the U.S. Energy Department showing that U.S. crude supplies climbed by 9.4 million barrels last week, three times as high as the consensus estimate of analysts surveyed by The Wall Street Journal.
Domestic production remained above nine million barrels a day, even as investors have banked on the falling number of rigs drilling for oil in the U.S. to start to curtail production. Baker Hughes Inc. said the U.S. rig count fell by 15 last week, resuming a three-month decline and falling to a seven-year low.
In refined-product markets, gasoline futures rose 0.1% to $1.4680 a gallon, while diesel futures fell 1.5% to $1.1801 a gallon.
Source: WSJ
