Oil futures finished with a loss on Tuesday, a day after settling at five-month highs, pressured by expectations that U.S. crude supplies climbed for a third straight week, as well as signs that Russia may not see a need to extend production cuts past June.
Still, traders remained cautious around potential supply outages tied to civil unrest in Libya.
U.S. benchmark West Texas Intermediate crude for May delivery CLK9, -0.59% on the New York Mercantile Exchange lost 42 cents, or 0.7%, to settle at $63.98 a barrel. On Monday, prices based on the front-month contract rose for a sixth straight session and marked the highest finish since Oct. 31, according to Dow Jones Market Data.
June Brent LCOM9, -0.63% fell 49 cents, or 0.7%, to $70.61 a barrel on ICE Futures Europe. The contract’s settlement at $71.10 on Monday was the highest for a front-month contract since Nov. 7.
Read: Gasoline prices up 8 straight weeks, with California on track to pay the most in nearly 5 years
Of most immediate concern, however, may be the data on U.S. oil and oil-product supplies, with government data due Wednesday from the EIA. The American Petroleum Institute will release its own figures late Tuesday.
The Energy Information Administration report on U.S. petroleum supplies due Wednesday “will likely be the most-important catalyst for the energy market this week,” wrote analysts at the Sevens Report.
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U.S. crude inventories likely rose by 2.8 million barrels for the week ended April 5, according to a survey of analysts conducted by S&P Global Platts. That would follow increases in each of the previous two weeks. The analysts also forecast supply declines of 1.9 million barrels for gasoline and 1.5 million for distillates.
“The closure of the Houston Ship Channel in recent weeks has likely skewed the weekly EIA reports; however, if the trends in the supply data (depressed net imports and sluggish production growth) continue in the near term, we should begin to see [crude] stockpiles resume their decline, which is very bullish for crude prices,” the Sevens analysts said.
In a monthly report Tuesday, the EIA did lift its forecast for 2019 U.S. crude production to 12.39 million barrels a day, up 0.7% from the March forecast. It also raised its 2020 output view by 0.5% to 13.1 million barrels a day. For 2019, the government agency lifted its West Texas Intermediate crude price outlook by 4.8% to $58.80 a barrel and its Brent view by 3.8% to $65.15.
Meanwhile, a Russian official suggested Monday that Russia wanted to raise oil production when it meets with the Organization of the Petroleum Exporting Countries in June given improving market conditions and falling stockpiles, according to a Reuters report.
“Russian comments are signaling a lack of support in extending the OPEC+ production cut agreement,” said Alfonso Esparza, senior market analyst, in an email update.
As for price-supportive factors, a major oil port in OPEC-member Libya could be closed as a result of fresh civil unrest in the country. The U.S. military has pulled a small contingent of American forces from Libya as the country was on the brink of full-scale civil war, with fighting continuing around the capital Tripoli.
“If this port were to be shut down due to the fighting, this could see a delivery outage of up to 300,000 barrels per day,” analysts at Commerzbank wrote in a note Tuesday. “The oil market is already undersupplied, so if supply from Libya also falls away the supply deficit will become even bigger.”
On Nymex, May gasoline RBK9, +0.50% rose 0.6% at $1.999 a gallon, but May heating oil HOK9, -0.49% declined by 0.6% to $2.045 a gallon.
May natural gas NGK19, -0.26% fell 0.3% to $2.699 per million British thermal units.
In other energy-related news,Saudi Aramco raised $12 billion in its debut international bond Tuesday, The Wall Street Journal reported, after drawing more than $100 billion in orders from investors. Originally, the company had planned to raise $10 billion in bonds to finance the acquisition of Saudi petrochemicals group Sabic.
Saudi Aramco had said the acquisition will almost double Aramco’s refining capacity by 2030. “We see this as a sign that the Kingdom finds it more important to secure the demand side rather than further increasing spare capacity on the production side,” said Per Magnus Nysveen, Rystad Energy’s head of analysis.
“We find it more likely that the Kingdom of Saudi Arabia will continue to prefer price over volume in the foreseeable future. And [Saudi Arabia] is the player in the oil market with the longest perspective of all players, so we see this as an important bullish indicator in the very long term for oil,” Nysveen said.
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