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Oil Prices Pare Losses
Falls coincide with low trading volumes ahead of Easter weekend
By
Christian Berthelsen and
Miriam Malek
Updated March 24, 2016 12:39 p.m. ET
Oil prices pared their losses Thursday after falling sharply when U.S. supply data a day earlier showed swelling stockpiles and stubbornly high production.
The benchmark U.S. oil contract was down 1.4% at $39.20 a barrel on the New York Mercantile Exchange, while the global Brent benchmark was down 0.7% at $40.19 a barrel on the ICE Futures Europe exchange. Both had been sharply lower earlier in the session.
Concern over growing oil stocks was triggered by U.S. Department of Energy data Wednesday showing U.S. crude supplies climbed by 9.4 million barrels last week, three times as high as the consensus estimate of analysts surveyed by The Wall Street Journal. U.S. production remained above 9 million barrels a day.
The oil markets rallied more than 50% since reaching multiyear nadirs in early February, as bearish traders closed out so-called short sales betting on further declines in the market, and bullish investors grew optimistic that the low prices would finally force producers to begin curtailing output. But the decline in U.S. production has been minimal, and stockpiles have swelled to all-time highs of 532 million barrels.
Meanwhile, major foreign state producers including Russia, Saudi Arabia and other members and nonmembers of the Organization of the Petroleum Exporting Countries have scheduled a meeting in Doha, Qatar April 17 to discuss freezing output at January levels. Still, that pace of output is near a record high, with most countries producing at their maximum ability, and would do little to curtail the oversupply estimated to be growing at a rate of 1 million to 2 million barrels a day.
An oil refinery in Big Spring, Texas. Concerns over growing U.S. oil stocks are putting pressure on prices. Photo: Getty Images
“The fundamental picture after all remains weak,” Commerzbank said in a note. “There are no viable arguments on the oil market for price rises.”
Analysts said some factors could begin to tighten supplies: a power crisis in Venezuela that could curtail the country’s crude exports, and Brazilian oil major Petrobras closing 11 oil fields to cut costs.
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But another big issue for the crude market is refined products, according to London-based analysts Energy Aspects. Higher demand for products is often good news for the crude price because it means more stocks can be used up in refineries.
Refined fuels are building at a rapid rate, even though demand for products such as gasoline is strong. The refinery maintenance period has begun in the U.S. and in Europe and that means that fuel production is significantly lower and less crude is being soaked up.
In refined product markets, gasoline futures were down 1.9% at $1.4267 a gallon and diesel futures were down 1.9% at $1.1805 a gallon.
Falls coincide with low trading volumes ahead of Easter weekend
By
Christian Berthelsen and
Miriam Malek
Updated March 24, 2016 12:39 p.m. ET
Oil prices pared their losses Thursday after falling sharply when U.S. supply data a day earlier showed swelling stockpiles and stubbornly high production.
The benchmark U.S. oil contract was down 1.4% at $39.20 a barrel on the New York Mercantile Exchange, while the global Brent benchmark was down 0.7% at $40.19 a barrel on the ICE Futures Europe exchange. Both had been sharply lower earlier in the session.
Concern over growing oil stocks was triggered by U.S. Department of Energy data Wednesday showing U.S. crude supplies climbed by 9.4 million barrels last week, three times as high as the consensus estimate of analysts surveyed by The Wall Street Journal. U.S. production remained above 9 million barrels a day.
The oil markets rallied more than 50% since reaching multiyear nadirs in early February, as bearish traders closed out so-called short sales betting on further declines in the market, and bullish investors grew optimistic that the low prices would finally force producers to begin curtailing output. But the decline in U.S. production has been minimal, and stockpiles have swelled to all-time highs of 532 million barrels.
Meanwhile, major foreign state producers including Russia, Saudi Arabia and other members and nonmembers of the Organization of the Petroleum Exporting Countries have scheduled a meeting in Doha, Qatar April 17 to discuss freezing output at January levels. Still, that pace of output is near a record high, with most countries producing at their maximum ability, and would do little to curtail the oversupply estimated to be growing at a rate of 1 million to 2 million barrels a day.
An oil refinery in Big Spring, Texas. Concerns over growing U.S. oil stocks are putting pressure on prices. Photo: Getty Images
“The fundamental picture after all remains weak,” Commerzbank said in a note. “There are no viable arguments on the oil market for price rises.”
Analysts said some factors could begin to tighten supplies: a power crisis in Venezuela that could curtail the country’s crude exports, and Brazilian oil major Petrobras closing 11 oil fields to cut costs.
Advertisement
But another big issue for the crude market is refined products, according to London-based analysts Energy Aspects. Higher demand for products is often good news for the crude price because it means more stocks can be used up in refineries.
Refined fuels are building at a rapid rate, even though demand for products such as gasoline is strong. The refinery maintenance period has begun in the U.S. and in Europe and that means that fuel production is significantly lower and less crude is being soaked up.
In refined product markets, gasoline futures were down 1.9% at $1.4267 a gallon and diesel futures were down 1.9% at $1.1805 a gallon.
