Oil prices stall as overheated crude rally leads to profit-taking

By Andres Guerra Luz on 3/9/2021
Offshore natural gas flaring test
Offshore natural gas flaring test

(Bloomberg) --Oil extended its retreat from multi-year highs after technical indicators showed crude rallied too far too fast.

Futures in New York slipped below $65 a barrel on Tuesday in choppy trading after surging to the highest since 2018 on Monday. Prices rose above the Upper Bollinger band during the last three sessions, signaling a pullback was in store. Meanwhile, OECD forecasts for this year and next suggest some European economies won’t make up lost GDP in 2022.

“We’re seeing some continued profit-taking off those highs,” said John Kilduff, a partner at Again Capital LLC. “Europe’s not helping in terms of the demand outlook, adding some bearish inputs for the petroleum complex.”

Crude had started the week strongly after an attack on a major Saudi Arabian crude export terminal. While a technical dip was expected in the short-term, OPEC+ output cuts are seen holding the market over until demand comes back in force. Standard Chartered Plc said the producer group’s supply restraint will likely even overtighten the market.

In the U.S., crude inventories are expected to rise for a third straight week, according to a Bloomberg survey. Gasoline and distillate stockpiles are seen decreasing. The industry-funded American Petroleum Institute will report its supply tally later Tuesday ahead of U.S. government data on Wednesday. Meanwhile, fuel demand in California -- the biggest American state -- is picking up.

Prices:

  • West Texas Intermediate for April settlement fell 49 cents to $64.56 a barrel at 10:37 a.m. in New York
  • Brent for May settlement declined 17 cents to $68.07 a barrel

“I wouldn’t rule out some more pullback,” said Vandana Hari, the founder of Vanda Insights in Singapore. “A settlement above $69 for Brent, even after the surprising OPEC+ decision, seemed like an over-reaction.”

 

Heavy maintenance work on North Sea oil fields is helping erode the flow of crude to Asia from some suppliers in the Atlantic basin as a key price spread between the two region balloons. North Sea supplies will be significantly constrained throughout the second quarter by routine maintenance programs.

In the U.S. shale patch, Chevron Corp. plans to ramp up investment in the Permian Basin through 2025, reversing the pandemic-driven production decline, the company said in an investor presentation Tuesday.

Other oil-market news:

  • Libya’s state energy company said it would increase oil production and vowed to remain politically neutral as a unity government seeks to stabilize the war-torn OPEC member.
  • In just over two months, North Sea dealmaking has surpassed last year’s total as companies look to make the most of crude’s emergence for the pandemic-induced slump.

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