Oil prices fall on expected stocks price rise
Oil fell on Tuesday for a second straight session as an expected rise in U.S. stocks and a weak technical outlook weighed on prices.
Crude oil inventories in the U.S. rose last week as imports increased and refinery utilization was little changed after dropping sharply the week before, a Reuters poll of analysts ahead of weekly inventory reports showed.
“We had a premium built into bad weather and the Alaskan pipeline leak,” said Jonathan Barratt, managing director at Commodity Broking Services.
“The market thought it was demand, which it wasn’t.”
U.S. crude oil for March delivery fell 26 cents to $87.61 a barrel at 0231 GMT, after posting a 1.39 percent loss on Monday. The front-month contract was down for a second session while March futures extended a decline for a sixth day.
ICE Brent crude for March fell 20 cents to $96.41 a barrel.
A fall in the previous session extended a medium-term downtrend for U.S. oil prices, Reuters technical analyst Wang Tao said.
Barratt expects prices to slide to $80 a barrel in the first quarter as investors focus on China’s measures to cool inflation while waiting for developed economies to show a steady recovery pace.
U.S. oil inventories were still above long-term averages while the Northern Hemisphere has passed the peak of cold weather, he added.
Crude oil and gasoline stocks are expected to rise by 900,000 barrels and 2.2 million barrels, respectively, in the week to January 21, a Reuters poll showed. Distillate stocks are seen down by 200,000 barrels last week.
Brent’s premium to U.S. benchmark West Texas Intermediate crude remained robust and reached $9.76 a barrel intraday on Monday, the highest since it hit $10.37 on February 12, 2009.
But the spread narrowed to less than $9, helped by news that trading company Hetco had sold a big North sea crude position.
The spread “is far too wide,” Barratt said. “It has blown out quite a few times before narrowing back to the $2-$3 range.”
Reuters analyst Wang Tao said Brent’s premium to WTI is on a firm uptrend and is expected to reach $11.29 per barrel in two weeks, after a minor drop to $8.00.
U.S. Federal Reserve policymakers on Tuesday begin a two-day meeting to be closely watched by investors for any changes to the country’s interest rates and monetary policy.
Source: Reuters