MW: Crude oil struggles as investors hesitate ahead of weekend
SAN FRANCISCO (MarketWatch) -- Crude oil futures fluctuated Friday, as some investors judged the recent run-up as too fragile to last through the long holiday weekend in the U.S.
Crude oil futures for July delivery recently added 16 cents at $74.77 a barrel at the New York Mercantile Exchange, recovering from an earlier dip into the red.
Crude has bounced back 6% for the week, but it remains down more than 13% for the month of May.
"Coming into the long weekend, a lot of people will want to liquidate positions," particularly after crude rose around 4% on Wednesday and then again on Thursday, said Peter Beutel, president of trading-advisory firm Cameron Hanover in New Canaan, Conn.
Crude had added to gains Friday after the government reported U.S. personal income rose 0.4% in April, while consumer spending was flat. Read Economic Report on personal income, spending.
U.S. stocks opened lower, with the S&P 500 (SPX 1,097, -6.40, -0.58%) off 0.3% in early trading. The dollar index (DXY 86.38, +0.20, +0.23%) , which compares the greenback with a basket of six currencies, edged higher to 86.26, but it was still down from 86.305 late Thursday.
On Thursday, crude oil rallied more than 4%, as China denied it was ready to sell euro-zone bonds and as other investments such as stocks also rose sharply.
But underlying fundamentals for the oil market are bearish, Beutel said. "It's going to take more than two days of rallies for people to think differently about this market," he said.
Weekly U.S. oil supplies rose more than expected last week.
While demand numbers are good news, "we still have an abundance of supply," Beutel said.
Due to Monday's Memorial Day holiday, the Department of Energy's Energy Information Administration will release its weekly report on energy products inventories Thursday at 11:00 a.m.
The agency's weekly report on natural gas in storage is scheduled for Thursday at 10:30 a.m., its regular time.
Oil's recent rallies also had to do with the forecast of an upcoming active hurricane season, said Phil Flynn, an analyst at PGF Best. With the National Oceanic and Atmospheric Administration predicting 14 to 23 named storms this season, this could be the most active season since 2005, of Katrina fame.
The NOAA forecast is a "sobering prediction," Flynn said.
The fundamental outlook is still negative for oil, he added. "Even if the euro zone recovers it is unlike that the euro as a currency will regain its former glory. Without a very strong euro, sharply higher energy prices will be less likely," Flynn said.
"The month of May had one major drop and after a recovery attempt and rally in early June, we expect another major drop. We also expect very wide trading ranges to continue giving very good opportunities for some big money trades and of course risky if you are on the wrong side."
Other energy products were also lacking a clear direction on Friday. Reformulated gasoline for July delivery added a penny, or 0.5%, to $2.05 per gallon. Natural gas for July delivery rose 6 cents, or 1.5%, to $4.36 per million British thermal units.
