MW: Oil eases with U.S. stockpiles, production back in focus
LONDON (MarketWatch) — Crude-oil futures eased Tuesday as investors booked profits after solid gains in the previous trading session and with U.S. oil inventories back in focus.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in May CLK5, -1.00% fell 51 cents, or 1%, to $51.66 a barrel, in the Globex electronic session.
Brent crude for May delivery LCOK5, -0.55% on London’s ICE Futures exchange fell 28 cents, or 0.5%, to $57.84 a barrel.
But oil prices still retained most overnight gains of around 6%, with that rally prompted by signs of strengthening Asian demand and expectations the market won’t immediately be swamped with more crude following a preliminary agreement to curb Iran’s nuclear program.
Money managers have been clear buyers of Brent crude since November, building the largest net long position since last June’s record peak, said analyst Tim Evans at Citi Futures.
“So far it seems as though they are still willing to add to those exposures rather than run away,” he said in a report.
Evans said despite the buying there is still an oil surplus in the market on the back of high OPEC oil production in March and the prospect of additional Iranian oil output.
Meanwhile, the Obama administration is set to face more domestic and international pressure on negotiations for a final Iranian nuclear agreement with strong opposition from Israel and lawmakers.
U.S. oil stockpile data is expected to drive oil prices for the rest of this week, with initial data from the American Petroleum Institute due later Tuesday. Analysts polled by Platts expect an increase of 3 million barrels during the week ended April 3. The U.S. Energy Information Administration is due to release its weekly supply report on Wednesday.
While U.S. crude inventories continue to rise, near-term oil production and higher refinery runs suggest that the build-up should slow in coming weeks with inventories peaking in April, Goldman Sachs said in a report.
The bank said the U.S. rig count has fallen faster than expected, but remains insufficient and oil prices will need to remain low in coming months to slow down U.S. oil production growth.
“We therefore reiterate our forecast for prices to remain low in 2015 with an only gradual recovery into year-end.” it said. It expects WTI crude to recover to shale’s marginal cost of $65 a barrel in 2016.
Nymex reformulated gasoline blendstock for May RBK5, -0.20% — the benchmark gasoline contract — was off fractionally at $1.842 a gallon.
