Oil-price gains wiped out as traders look to central banks 

Oil futures eased in early Asia trade Tuesday, wiping out overnight gains during the New York trading session, as traders await the outcome of the U.S. and Japan central banks policy meetings.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in October CLV6, -0.81%  traded at $43.60 a barrel, down $0.26, ot 19 in the Globex electronic session. November Brent crude LCOX6, -0.74%  on London’s ICE Futures exchange fell $0.15, or 0.3%, to $45.80 a barrel.

Few expect the U.S. Federal Reserve to raise interest rates this month, but investors will be watching for hints at what the Fed might do later this year. Market players will also be watching if the Bank of Japan would push a key interest rate further below zero. Meetings of both the central banks are due to conclude Wednesday.

Interest rate movements have direct impact on the strength of the greenback, the currency used in the oil industry. A stronger dollar makes oil more expensive for traders holding a foreign currency.

For over two years, a growing glut of supply has kept oil prices in the doldrums. Prolonged softness has prompted several smaller oil producers inside the Organization of the Petroleum Exporting Countries, such as Venezuela, to lobby for a collective action to buoy prices. However, the plea has largely fallen on deaf ears as bigger oil producers are focusing on expanding their market shares over lifting prices.

Analysts say that since prices have edged up after tumbling to a 12-year low in February, there is even less urgency now for the cartel to intervene.

“As long as prices stay above $40, there is no impetus for major OPEC producers to even entertain the idea of a production freeze,” said Gao Jian, an energy analyst at the Shandong-based SCI International. U.S. oil prices have stayed above $40 for over five months since early April.

The 14-member bloc is scheduled to meet next Wednesday in Algeria. OPEC chief Mohammed Barkindo over the weekend made it clear that no decision would be made at the meeting. However, if all members agree on a policy, an emergency meeting would be called later this year.

Investors are also watching developments in Libya. For months, the country’s oil sales have been stunted by internal conflicts. A planned outbound shipment was delayed again last weekend after more violent clashes ensued at the key eastern crude-oil ports.

Libyan output now stands at about 300,000 barrels a day, well below the country’s full capacity. Officials say they could quickly ramp up if oil ports remained open and secure for an extended period. If Libyan production rises, it could weigh on oil prices as a global oversupply of crude continues to persist.

But, “until the civil war abates we do not expect any lasting recovery in Libya’s oil exports,” Standard Chartered said in a note.

In the near term, the data points closely watched will be the weekly U.S. crude and distillate inventories, to be released later Wednesday. Survey by S&P Global Platts expects crude stocks to have increased by 2.8 million barrels in the week ended Sept. 16 due to lower refining activities. Gasoline stocks likely fell 500,000 barrels in the same week.

China is also expected to release its detailed oil trade data for August on Wednesday. Preliminary data showed the world’s second largest oil consumer imported 32.85 million tons of crude last month.

Nymex reformulated gasoline blendstock for October RBV6, -1.70%  —-the benchmark gasoline contract — fell 70 points to $1.4138 a gallon, while October diesel traded at $1.3912, 32 points lower.

ICE gasoil for October changed hands at $407.75 a metric ton, down $10.50 from Monday’s settlement.

Source: MarketWatch

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