Oil Edges Lower After Run Toward $74 as Bullish Momentum Stalls

Jun 24, 2021

(Bloomberg) Oil reversed gains as traders paused to take stock of a recent surge in prices in a tightening market.West Texas Intermediate futures were 0.9% lower. Prices gained as much as 0.7% earlier after U.S. gasoline stockpiles unexpectedly fell last week, while nationwide crude supplies dropped for a fifth week in the longest run since January. Chinese inventories have also shrunk to the lowest this year, according to data provider Kayrros.

The recent run higher brought oil close to overbought territory on the 14-day relative strength index. It could be a signal of near-term weakness.

U.S. crude inventories drop for a fifth straight week

“Oil prices are struggling for upside following a bout of profit-taking,” analysts at brokerage PVM Oil Associates Ltd. wrote in a report. “The contracts are pausing for breath” and the lull in bullish momentum may last a day or two. “Beyond that, the only way is up,” they said.

The recovery has accelerated as vaccinations are rolled out worldwide, boosting fuel consumption and helping to drain stockpiles that were built up during the height of the pandemic. The OPEC+ alliance is scheduled to meet toward the end of next week to discuss its production policy for August, and some nations are considering backing an output increase.

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Prices
WTI for August delivery fell 64 cents to $72.44 a barrel at 8:47 a.m. in New York Brent for the same month lost 60 cents to $74.59, after earlier rising as much as 59 cents. It closed at the highest level since October 2018 on Wednesday

U.S. crude stockpiles fell by 7.6 million barrels last week, while inventories at the storage hub of Cushing dropped for a second week, according to data from the Energy Information Administration on Wednesday. Gasoline supplies shrank by 2.9 million barrels, compared with a forecast increase in a Bloomberg survey.

Chinese crude oil inventories declined to about 974 million barrels in the week ended June 22, down from more than 1 billion barrels at the end of March, according to Kayrros. Stockpiles at the nation’s 190 terminals were at about 973 million barrels at this time last year, it said.

Meanwhile, U.S. negotiators are preparing to return to a seventh round of indirect talks with Iran on reviving a nuclear deal. A rejuvenated agreement may lead to the lifting of sanctions on Tehran and increased crude flows, although progress has been slow and complicated so far.

Other market news:
U.S. refiners pushing to meet rising demand are turning to the Persian Gulf and Russian Far East for crudes that are typically bought by Asian processors, tightening the physical market for oil from those regions. Saudi Arabia’s energy minister said the OPEC+ alliance has a role in “taming and containing” inflationary pressures, just hours after Brent crude surged back above $75 a barrel. The U.S. shale patch, which has held oil production steady in the face of rising crude prices, is gearing up for a global supply shortage in the next few years, according to a survey of executives and company owners.

Other market news:

U.S. refiners pushing to meet rising demand are turning to the Persian Gulf and Russian Far East for crudes that are typically bought by Asian processors, tightening the physical market for oil from those regions.
Saudi Arabia’s energy minister said the OPEC+ alliance has a role in “taming and containing” inflationary pressures, just hours after Brent crude surged back above $75 a barrel.
The U.S. shale patch, which has held oil production steady in the face of rising crude prices, is gearing up for a global supply shortage in the next few years, according to a survey of executives and company owners.