FX:Crude Futures Head Lower as Traders Take Profits
At 1105 GMT, the front-month contract for June Brent on London's ICE futures exchange was down 31 cents, or 0.28%, at $105.16 a barrel.
The front-month light, sweet crude contract for June on the New York Mercantile Exchange was trading down 45 cents, or 0.47%, at $95.71 a barrel.
Steep rises in oil prices last week have reversed somewhat, while fear of a hike caused by tension surrounding Syria and Israel has not yet materialized.
"Israeli airstrikes were the center of attention on Monday," wrote analysts at PVM, who noted that while this tension had dissipated: "it is worth keeping in mind that Middle Eastern countries, OPEC and non-OPEC, have a combined oil production of over 25 million barrels a day, so any escalation of tensions in the region could easily turn the global supply/demand picture bullish."
Crude oil inventories in the U.S. are at 395 million barrels, "the highest level ever," noted PVM, which could have the effect of softening prices.
They pointed out, however, that the ample supplies from the U.S. have been somewhat counterbalanced by expected declines in Nigerian, Angolan and Russian exports in May and June.
Last week, they wrote, "this supported the Brent structure, which flipped back into respectable backwardation of around $0.50/bbl after a few days of contango in the first half of April," they wrote.
This held true in London trading Tuesday morning, where the front-month contact traded above that for the following month.
This structure makes holding oil futures contracts more attractive, because traders receive a small premium when the contract rolls over.
Commerzbank also noted that energy prices have fallen back slightly as traders take profits.
"Evidently the first market players are viewing $100 per barrel as a good entry level price, something that cannot be said for gasoil, where money managers are actually positioned net short for the first time, with 7.3 thousand contracts," they wrote in a note.
At 10.06 GMT, the ICE's gasoil contract for May delivery was up $6.50, or 0.76%, at $865.25 per metric ton, while Nymex gasoline for May delivery was down 109 points, or 0.38%, at $2.8548 per gallon.
