Oil Turns Lower as Glut Continues to Pressure Market
20 June 2017 - 06:18AM
Dow Jones News
By Christopher Alessi and Alison Sider
Oil prices turned lower Monday, failing to hold on to earlier
gains as the stubborn glut of oil in storage continued to weigh on
the market.
U.S. crude futures settled down 54 cents, or 1.21%, at $44.20 a
barrel on the New York Mercantile Exchange. Brent, the global
benchmark, fell 46 cents, or 0.97%, to $46.91 a barrel on ICE
Futures Europe.
Oil prices were pulled down by falling prices for gasoline and
diesel, as well as pressure ahead of Tuesday's expiration of the
July futures contract, said Donald Morton, senior vice president at
Herbert J. Sims & Co., who runs an energy-trading desk.
Some traders are looking ahead to data scheduled for release
Wednesday on the amount of oil and fuel in U.S. storage tanks.
Those figures have disappointed investors for weeks, showing that
stockpiles in the U.S. have remained high despite production cuts
by the Organization of the Petroleum Exporting Countries and other
major producers.
"There's reason to believe the report will again lean to the
bearish column," Mr. Morton said.
Even though major OPEC producers and Russia have cut output
since January, fading faith in their agreement's effectiveness has
sent prices down more than 17% this year, reversing the gains seen
when they initially agreed to reduce output in late 2016.
"The decline in oil inventories has been modest this year. As a
result, investors have curbed their oil exposure in the futures
market," Giovanni Staunovo, an energy analyst at UBS, wrote in a
note Monday.
U.S. producers have ramped up more quickly than most were
anticipating, undermining some of OPEC's efforts. U.S. data Friday
showed the U.S. oil rig count increased for a 22nd consecutive
week, with operators adding another six oil rigs last week.
Market participants were also concerned about the expected
increase in Libyan and Nigerian oil output. Recent data suggest the
two countries could add up to 250,000 barrels a day to OPEC's June
output level, according to PVM Oil.
The bearish view is likely to remain the dominant sentiment in
the short term. Recent options contracts show traders are hedging
for the potential of oil falling below $41 a barrel in the months
ahead, said Chris Kettenmann, chief energy strategist at New
York-based Macro Risk Advisors.
"It's a race to the bottom," he noted, adding that investors may
be "betting on further downside."
Virendra Chauhan, an oil analyst at consultancy Energy Aspects,
agreed. "Nothing fundamentally is going to push oil prices higher
in the near term," he said.
And with bearish sentiment taking over, some are wary of calling
the bottom too soon.
"It should stop here, but I don't think it's going to. I think
we're going to start seeing it slide," said Mark Waggoner,
president of Excel Futures.
Gasoline futures fell 0.42 cent a gallon, or 0.29%, to $1.4506.
Diesel futures fell 1.59 cents, or 1.11%, to $1.4111 a gallon.
Jenny W. Hsu contributed to this article
Write to Christopher Alessi at christopher.alessi@wsj.com and
Alison Sider at alison.sider@wsj.com
(END) Dow Jones Newswires
June 19, 2017 16:03 ET (20:03 GMT)
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