MW: Oil gives back some gains as investors weigh up supply
Oil futures fell Thursday, giving back some of the strong gains scored in the previous trading session, as investors weighed indications of stronger demand and steadily rising U.S. oil supplies.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in April CLJ5, -2.02% traded at $50.01 a barrel, down 98 cents, or 1.9%.
Brent crude for April delivery LCOJ5, -0.68% on London’s ICE Futures exchange fell 36 cents, or 0.6%, to $61.27 a barrel.
Nymex West Texas Intermediate crude gained 3.5% in Wednesday’s session, snapping a five-session losing streak, while Brent crude had settled 5% higher on the back of bullish comments by Saudi Arabia’s oil minister.
Wednesday’s U.S. oil stockpile data was largely bearish with a larger-than-expected increase of 8.4 million barrels. This was partly offset by diesel stocks that have been declining sharply due to extreme cold weather and strong heating demand in the U.S. northeast region, Societe Generale said in a note.
“Our view remains that there is more downside than upside to crude prices going into the second quarter, due to large global stock-builds expected in the first half of this year,” the bank said.
However, not everyone agrees that rising U.S. oil stockpiles are a cause for concern.
Adam Longson, head of energy research at Morgan Stanley, said that in 2014 investors were convinced that record inventories in U.S. oil stockpiles would cause a large blow-out in oil prices but it did not play out that way.
He maintains the view that the U.S. Gulf Coast has a long way to go before its oil storage is full, and concerns over storage capacity are likely overblown.
Meanwhile, oil producers are increasingly feeling the pain of low oil prices.
Nigeria, Africa’s top crude producer, on Wednesday cut its forecast for oil prices this year to $52 a barrel, from $65 in December, and also lowered the value of its currency against the greenback. Moody’s Investors Service downgraded the credit rating of Brazil’s state-run oil giant Petrobras S.A.
Colombia’s oil production is forecast to drop sharply by 4.8% in 2015 as falling revenues from lower oil prices undermine the ability of producers to maintain output levels, Business Monitor International, a unit of Fitch Ratings, said.
BMI also said significant slowdown in activity and investment in North Sea oilfields will be detrimental to the region’s oil production post-2020.
Nymex reformulated gasoline blendstock for April 5 RBJ5, -0.47% fell by nearly a penny to $1.9071 a gallon. Nymex April natural gas NGJ15, -1.64% fell 4.7 cents, or 1.6%, to 2.815 per million British thermal units.
