LONDON--Crude-oil futures were up Thursday morning after the steep falls earlier in the week, but uncertainty over speculative positions still to be liquidated means the downward slide may not be over.
At 0901 GMT, the front-month contract for June Brent on London's ICE futures exchange was up 80 cents, or 0.82%, at $98.49 a barrel.
The front-month light, sweet crude contract for May on the New York Mercantile Exchange was trading up 63 cents, or 0.73%, at $87.31 a barrel.
Brent crude futures fell over 1% Wednesday, partly due to a strengthening dollar, which makes crude more expensive for holders of other currencies.
Olivier Jakob of Petromatrix said that the market continues to be very well-supplied, while there are some "very large speculative positions on the long side in crude oil" -- meaning that futures buyers have been betting that the price will rise.
If the price shows signs of falling too far holders of long positions sell off, leading the price to fall further still. The market is poised to see whether more value will be lost in the coming days.
"It's always difficult to know when you have this level of speculative length," Mr Jakob said. But while the price could drop below $95 a barrel, "$90 is going to be a value that is...pretty well-supported," he said, suggesting that if Brent comes close to that level Saudi Arabian production control and other supporting factors would likely kick in.
Oil has also been affected by cross-asset weakness, with pressure on the gold price evident Wednesday and on industrial metals today.
Torbjorn Kjus of DNB Markets, in a note to clients, said that he was "encouraged by the fact that financial players have now reduced their net length significantly in both New York and in London. This removes a significant chunk of the downside price potential in the short term."
DNB has changed its outlook on oil from bearish to bullish for the coming month as refineries come out of maintenance, and refinery margins -- the amount of money it is possible to make on products refined from oil -- stay strong enough to support demand for crude.
Analysts at PVM were much less optimistic, however, citing rising U.S. stocks and weak data on Chinese demand.
"Overnight we learnt that Shell declared force majeure on Nigerian Bonny Light exports as its 150,000 barrels a day Nembe Creek pipeline is under repair," PVM said. "The fact that this force majeure has failed to support the front-month Brent spread tells us that we shall need to see major supply disruption in the North Sea to take the Brent structure back into backwardation."
At 0905 GMT, the ICE's gasoil contract for May delivery was up $3.25, or 0.39%, at $828.50 per metric ton, while Nymex gasoline for May delivery was up 219 points, or 0.80%, at $2.7509 per gallon.
