West Texas Intermediate crude-oil futures settled 1.5% lower Thursday, giving up most of their gain from a 2% rally a day earlier. Meanwhile, production worries in Libya provided support to Brent crude, which was little changed. WTI crude rallied Wednesday on comments from Saudi Arabian Oil Minister Ali al-Naimi, but the market now realizes that his words “contained nothing all that fundamentally revealing,” and has since “choked on yesterday’s more relevant U.S. stock build,” said Matthew Parry, analyst at the International Energy Agency.
On the New York Mercantile Exchange, crude for delivery in April settled 77 cents lower, or 1.5%, to $50.76 a barrel. Brent crude for April delivery on London’s ICE Futures exchange settled down 7 cents, or 0.1%, to $60.48 a barrel. Tyler Richey, an analyst for the 7:00’s Report, which offers daily markets commentary, said Wednesday’s crude-oil rally on the Nymex “was not necessarily because of the various, slightly bullish, OPEC headlines but rather because the market was too oversold and low time-frame shorts were squeezed out of the market.” The “’short oil’ trade remains one of the most crowded in the market and until we see some ‘position balancing’, expect futures trading to remain volatile,” he said. “However, looking at the medium term, the fundamentals continue to point to lower prices as global supply is high and demand is soft.” Prices, for now, will likely remain range-bound between $48 and $52.50, Richey forecast.
The U.S. Energy Information Administration on Wednesday reported a bigger-than-expected 10.3 million-barrel weekly increase crude inventories. But after initial losses following the data, Nymex crude prices climbed. Analysts attributed that day’s strength to hints of strengthening demand for oil in the form of comments from Saudi Arabia’s oil minister and a move by the Saudis to raise selling prices for their Arab Light crude oil.
Meanwhile, Libya’s National Oil Co. on Wednesday declared a force majeure related to 11 oil fields in the center of the country, saying it was no longer able to ensure security at the sites after attacks by Islamic State militants. And China on Thursday projected economic growth of about 7% for 2015, lower than the 7.4% it achieved in 2014. Back in the U.S., refiners and striking union workers are digging in for a protracted battle that could last through the spring. The strike that affects around 20% of U.S. oil-refining capacity, along with high inventories, have widened the Brent-WTI price spread.