Oil Rally Falters After Price Hits US$75 for First Time Since 2014
Crude pared gains after hitting a three-year high in New York as prospects for accelerating supply damped enthusiasm for the rally and traders curbed bullish bets before the US holiday.
Futures closed just 0.3 percent higher after surging past US$75 a barrel earlier in the session.
Oil has been buffeted lately as President Trump — facing high retail gasoline prices ahead of midterm elections — pushes Saudi Arabia to boost output. Plus, a report today from data-provider Genscape Inc. was said to show Texas Gulf Coast crude stockpiles rose by about 431,000 barrels last week.
The quick drop after WTI reached US$75 might have been due to “bout of long liquidation in front of the holiday,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St Louis. And “there is always risk” Mr Trump will release oil from the US Strategic Petroleum Reserve to cap prices, he said.
Oil surged in the past two weeks as the US pushes allies to end imports of Iranian crude, disruptions persist in places like Libya and American crude inventories shrink.
Morgan Stanley raised its Brent crude forecast to US$85 a barrel through to the third quarter of 2019, citing a tighter market than previously anticipated.
The Saudi Cabinet “affirmed the Kingdom’s readiness to use its spare capacity when needed to deal with any future changes in oil supply and demand rates, in co-ordination with other producing countries,” according to a report by the Saudi Press Agency.
Investors had questions as “to whether Saudi Arabia and Russia could or would really be able to ramp production quickly enough,” said Rob Haworth, who helps oversee US$151 billion at US Bank Wealth Management in Seattle.
“The news of their commitment to ramp production quickly enough along with some evidence that Saudi Arabia is ramping production is giving the market some pause.”
West Texas Intermediate crude for August delivery rose 20 cents to settle at US$74.14 a barrel on the New York Mercantile Exchange, after earlier rising to as high as US$75.27.
A measure of oil market volatility jumped to the highest since mid-February, before ticking lower.
Brent for September settlement advanced 46 cents to end the session at US$77.76 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a US$6.17 premium to WTI for September.
US crude stockpiles are forecast to have declined five million barrels last week, according to a Bloomberg survey ahead of government data to be released on the 5th July. Inventories at Cushing, Oklahoma, fell two million barrels last week, according to a separate forecast compiled by Bloomberg.
The industry-funded American Petroleum Institute was due to release its weekly tally of inventories later on the 3rd July.
Source: Rigzone