MW: Crude selloff on pause as traders look ahead to supply data
Crude prices barely moved in early Asia trade Tuesday, with trading expected to stay largely subdued ahead of the New Year holiday.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February CLG6, +0.24% traded at $36.88 a barrel, up $0.07 in the Globex electronic session. February Brent crude LCOG6, +0.25% on London’s ICE Futures exchange added $0.04 to $36.66 a barrel.
On Australia’s S&P/ASX 200 XJO, +1.15% , the energy sector fell 0.5%, putting its month-to-date losses at 8.5%. Energy shares on Hong Kong’s Hang Seng Index HSI, +0.36% were down 0.6%, and off 2.7% month-to-date. In the broader market, the Shanghai Composite Index SHCOMP, +0.85% was flat and Hong Kong’s Hang Seng HSI, +0.36% was up 0.2%. Japan’s Nikkei Stock Average NIK, +0.58% was flat and Australia’s S&P/ASX 200 was up 0.6%, reopening after the Boxing Day holiday Monday.
Overnight, both Nymex and Brent fell more than 3% after Japan’s industrial production decreased for the first time in three months in November by 1%, stoking fears of waning crude demand in the region.
“Japan certainly played a small part in the market but another reason for the fall is that many traders are squaring their positions ahead of the holiday,” said Daniel Ang, a Phillip Futures analyst, noting prices were also in correction mode after last week’s rise.
Traders will be mostly taking cues from this week’s U.S. official crude stockpiles and production data to be released on Wednesday. On Monday, data provider Genscape Inc. said stockpiles at Cushing, Oklahoma, the delivery point for the WTI contract, rose by more than 1.2 million barrels in the week that ended Friday, according to a person who had reviewed the report.
The expansion of U.S. crude inventories, Iran’s expected full resumption of oil supply to the market, coupled with the Organization of the Petroleum Exporting Countries’ confirmation last week that output by its members will continue to grow next year, all point to a bigger global overhang in the future.
“For 2016, we are once again fairly confident of a first half supply and demand surplus, with weaker seasonable demand for oil and a likely increase in total OPEC supply to 32 million barrels per day or more as sanctions against Iran are lifted,” said Tim Evans, a Citi Futures analyst in a note.
While demand for crude will likely remain in the doldrums in the coming months, analysts were upbeat about demand for gasoline as auto sales in China got a boost from a new tax-break and drivers in America take advantage of cheaper gasoline prices.
“Gasoline demand will stay robust because although there has been much talk about renewable energy, globally there has not been a big shift in the way people drive,” said Mr. Ang.
