Crude-oil futures declined Monday, with energy demand concerns, signs of rising U.S. oil production and a stronger dollar pressuring prices, which had also suffered a drop last week.
Prices, however, finished off the session’s worst levels, with John Caruso, senior market strategist at RJO Futures, suggesting that the market may have seen “some seller exhaustion” ahead of the weekly supply data from the American Petroleum Institute on Tuesday and Energy Information Administration Wednesday.
“We’re light on economic data until the back half of this week as well—so other than anything geopolitical, I’d suspect some more price discovery and consolidation” between now and Wednesday,” he added.
U.S. benchmark March West Texas Intermediate crude oil CLH9, -0.72% fell 31 cents, or 0.6%, to settle at $52.41 a barrel on the New York Mercantile Exchange, the lowest since Jan. 28. It had dropped to as low as $51.23 Monday and tumbled 4.6% last week—the largest loss since the week ended Dec. 21, according to Dow Jones Market Data.
International benchmark April Brent LCOJ9, -1.01% lost 59 cents, or 1%, to $61.51 a barrel on ICE Futures Europe, after declining by 1% last week. Prices based on the front-month contract finished at their lowest since Jan. 29.
“The macro picture surrounding global economic situation is still very much uncertain. That continues to weigh on the demand side,” said Caruso.
Additionally, the market saw a jump in the U.S. oil-rig count last week and there are “rumors that Venezuela is trying to skirt U.S. sanctions by means of trade with India,” he told MarketWatch. “More downside in coming weeks is our forecast,” but with WTI likely holding the $49-$48 area.
Baker Hughes BHGE, +0.73% on Friday reported that the number of active U.S. rigs drilling for oil rose by 7 to 854 last week. The rig count declined by 15 a week earlier, while the total active U.S. rig count edged up by 4 to 1,049.
Traders continued to weigh up risks to global supply from the Organization of the Petroleum Exporting Countries output cuts and U.S. sanctions on Venezuela. Both offer support to prices, but signs of a weakening global economy have raised concerns about a slowdown in energy demand.
“I do think OPEC continues to try to support prices along $50” a barrel, said Caruso. “Anything we see under $50 [a barrel]—we’re buyers over here.”
Meanwhile, Craig Erlam, senior market analyst at Oanda, said a stronger dollar also pressured oil prices. The ICE Dollar Index DXY, +0.43% rose over 1.1% last week, and was up 0.4% Monday. Dollar strength makes commodities priced in the unit less attractive to investors using another currency.
Erlam said investors will be watching out for the OPEC monthly report on Tuesday, which should provide clearer insight into how the oil cartel and its allies are complying with their global output agreement. “With there being so many doubts over global growth this year, it will also be interesting to see what impact this has on the cartel’s assessment of demand growth and whether that will exacerbate the oversupply issue,” he said.
The Energy Information Administration is also scheduled to release its weekly Short-term Energy Outlook report Tuesday, which include forecasts for oil prices. The International Energy Agency’s monthly oil report is due Wednesday.
In other oil-related news, Reuters reported Monday afternoon that the Libyan National Army took control over the country’s largest oilfield from protesting state guards—a move that could lead to a resumption of oil production there.
Among other energy contracts, March natural gas NGH19, +2.36% added 2.3% to $2.642 per million British thermal units as traders continued to eye weather-related demand for the heating fuel. Last week, prices lost about 5.5%.
“While current weather expectations call for slightly above average temperatures across much of the eastern U.S. over the next week, those conditions are expected to fade moving into the latter half of the month with colder weather settling in across much of the western and central parts of the country,” said Robbie Fraser, global commodity analyst at Schneider Electric.
Also on Nymex, March gasoline RBH9, -1.93% fell by 1.9% to $1.419 a gallon, and March heating HOH9, -0.89% lost 0.9% to $1.892 a gallon.
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