Oil retreats after rising above $50 for first time since May
New York: Oil slid after briefly rising above $50 a barrel in New York and sparking concern that prices surpassing that key level will only bring on more shale supply.
Futures declined 0.7% in New York after advancing for five straight sessions. OPEC and non-OPEC producers will convene in Abu Dhabi next week to discuss why some nations aren’t complying with production cuts. Baker Hughes Inc. data Friday showed the US oil rig count rose yet again and remains at the highest level since April 2015.
“It displays a healthy dose of skepticism that we couldn’t stay above $50,” Tamar Essner, an energy analyst at Nasdaq Inc. in New York, said by telephone. “It really speaks to this well-entrenched thesis in the market about prices being range-bound and the understanding that $50 and above facilitates too much production from shale.”
Oil climbed above its 200-day moving average last week for the first time since May as producers such as Saudi Arabia and Kuwait promised to reduce crude exports. Yet, US crude production is still above 9.4 million barrels a day, with doubts lingering over whether efforts by the Organization of Petroleum Exporting Countries and its allies including Russia will be successful in efforts to rebalance the market.
Representatives of some OPEC and non-OPEC nations will meet in the United Arab Emirates capital on 7-8 August to discuss why some of them aren’t fully implementing their commitment to cut output, according to an OPEC statement.
“There’s been some constructive developments coming out of OPEC, but the onus is on OPEC to have that shown in the data,” Essner said. “The data out of OPEC has been bearish.”
West Texas Intermediate for September delivery slipped 33 cents to $49.38 a barrel at 12:10 pm on the New York Mercantile Exchange. Prices climbed $3.94 last week to close at $49.71 on Friday, the highest settlement since 26 May. Total volume traded was about 10% above the 100-day average.
The US benchmark breaking through $50 a barrel could be interpreted as a bullish technical breakout, but with seasonal weakness ahead, now is a good time to sell, Paul Ciana, Bank of America Merrill Lynch chief technical strategist, said in a Bloomberg Television interview.
Brent for September settlement, which expires Monday, declined 20 cents to $52.32 a barrel on the London-based ICE Futures Europe exchange, after adding 9.3% last week. The global benchmark traded at a premium of $3.00 to WTI. The more-actively traded October contract dropped 24 cents to $51.98.
Royal Dutch Shell Plc’s Pernis plant, Europe’s largest refinery, halted several units late Saturday following a fire, the company said in a statement. The Netherlands plant will keep most of its units shut Monday, a company spokesman said.
The September gasoline crack spread, a rough measure of the profit from refining crude into gasoline, rose as much as 4.4 to $20.44% a barrel, the highest level in more than a week.
“You’re getting some support from the Pernis refinery fire. That’s stoking the cracks spreads more than anything else right now,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. “There seems to be a lack of clarity” around when refinery units will restart. Bloomberg
—With assistance from Heesu Lee Stephen Stapczynski and Paul Burkhardt