LONDON--Oil prices fell Tuesday on concerns the recent rally
might not be sustainable.
U.S. oil prices have risen close to 30% since a low in March on
expectations the oversupplied market will come into balance later
in the year. But analysts have warned that although U.S. oil
production will slow in the coming months, other major producers
are still pumping at a fast pace, exacerbating the global glut.
Brent crude for delivery in June fell 0.5% to $63.12 a barrel on
London's ICE Futures exchange. On the New York Mercantile Exchange,
light, sweet crude futures traded down 0.3% at $56.20 a barrel.
Oil prices have risen in nine of the last 11 trading sessions
but are still off more than 40% from last summer's peak.
"While the shift in sentiment isn't necessarily flawed, the
swing to the extreme is overdone," said analysts at London-based
consultancy Energy Aspects. "There are still plenty of stocks.. to
be run down before markets tighten. Globally, draws don't start
until late Q3 15 at the earliest."
Market participants are bracing for the latest U.S. supply data
to see if the recent decline in weekly production will be
sustained.
The American Petroleum Institute, an industry group, will
release its own inventory data later Tuesday. Official data from
the U.S. Energy Information Administration is due Wednesday.
Market observers are also starting to speculate whether the
Organization of the Petroleum Exporting Countries will make any
changes to its stance of maintaining oil production levels at its
next meeting in June.
Key OPEC members like Saudi Arabia and Iraq have been increasing
their production in recent months, leading the organization to
overshoot its own target output of 30 million barrels a day.
According to J.P. Morgan oil prices have stabilized and that the
medium-term outlook has improved substantially since the beginning
of the year.
But the bank cautions that "near-term price volatility could
persist as supply from the Middle East is expected to remain high,
with Saudi Arabia and Iraqi production on the rise."
J.P. Morgan sees Brent averaging $59 a barrel this year and
rising to $62 a barrel in 2016. U.S. oil prices would average $52 a
barrel this year and rise to $54 in the next, the bank says.
Nymex reformulated gasoline blendstock for May--the benchmark
gasoline contract--fell 0.6% to $1.9189 a gallon, while ICE gas oil
for May changed hands at $571.50 a metric ton, down $2.50 from
Monday's settlement.
Eric Yep contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
Access Investor Kit for Citigroup, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US1729674242
Access Investor Kit for Dominion Resources, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US25746U1097
Subscribe to WSJ: http://online.wsj.com?mod=djnwires