WSJ:OIL FUTURES:Crude Mixed As Market Digests IEA Oil Stock Release
By Selina Williams
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Crude futures are mixed Friday with Brent continuing to follow through on the previous session's sharp selloff after the International Energy Agency's surprise announcement of a 60 million barrel oil stock release, while U.S. oil futures rebounded slightly.
More volatility is expected Friday as the market continues to digest the IEA's announcement and there could be more follow through to the downside and testing of the lows, said Ole Hansen, manager of the futures and fixed income trading desk at Saxo Bank.
At 1034 GMT, the front-month August Brent contract on London's ICE futures exchange was down 46 cents, or 0.4%, at $106.80 a barrel.
The front-month August contract on the New York Mercantile Exchange was trading up 49 cents, or 0.5%, at $91.51 a barrel.
"After the big volatility yesterday we can expect to see some big trading ranges today," Hansen said, with buying opportunities seen as the futures contracts hit the lows.
Analysts said the IEA's stock release will increase supply in July and August and exert near-term pressure, but could be bullish in the long term once Gulf producers reduce output and IEA members restock reserves.
The IEA's stock release results in 2 million barrels a day of extra oil made available to the market. The IEA is due to issue a complete breakdown of the stock release Monday, detailing what type of crude and products will be released from the major consuming countries.
"The ultimate implications of the stock release are far greater and longer-term, threatening to jeopardize consumer-producer relationships," and the balances may tighten up by year-end and into 2012, Barclays Capital said in a note.
However, short-term, the stock release is clearly bearish, in particular for Brent which has been most exposed to the shortage of Libyan barrels in the market.
Brent already made an attempt to test lows in early trade, dropping 1.5% to hit a low of $105.67 a barrel, not far off a May 6 low of $105.15 a barrel. A break below this level could trigger some stop selling, Hansen said.
Earlier, dollar weakness versus the euro had helped put a floor under prices somewhat.
The euro got a lift in early trade on stronger-than-expected German data which pushed up European stocks. It was already higher Thursday on the news of Greece's agreement with the European Union and the International Monetary Fund on a five-year austerity program.
However, any positive sentiment from the Greek plan is likely to be short-lived once the realization sets in that the austerity program requires a vote in the Greek parliament at the end of June before it can be implemented, said Bjarne Schieldrop, chief commodities analyst at SEB
"We thus hold a bearish view for Brent crude for the day ahead," Schieldrop said.
The ICE's gasoil contract for July delivery was down $6.25, or 0.7%, at $882.75 a ton, while Nymex gasoline for July delivery was up 152 points, or 0.6%, at $2.7969 a gallon.
