Market Close: Sep 28 Down

NEWS

Oil turned lower Thursday, pulling back after a climb in the previous session, but prices kept a tight hold on gains so far this month as traders readied for the last trading session of the quarter.

So-called profit-taking as well as technical trading were to blame for oil’s retreat, Tyler Richey, co-editor of the Sevens Report, told MarketWatch. “The September rally was getting overextended to the upside,” but for now, the near-term uptrend remains intact.” Also, “the calendar is helping amplify today’s declines as money managers and traders are booking profits and closing positions ahead of both the month and quarter’s end” Friday, he said.

The U.S. benchmark, West Texas Intermediate crude for November delivery fell by 58 cents, or 1.1%, to settle at $51.56 a barrel on the New York Mercantile Exchange. Prices are still up around 2% for the week, poised for a monthly rise of 7.6% Global benchmark November Brent crude shed 49 cents, or 0.9%, to $57.41 a barrel on ICE Futures Europe, ahead of the contract’s expiration at Friday’s finish.

Oil settled higher Wednesday after the U.S. Energy Information Administration reported an unexpected 1.8 million barrel decline in crude inventories in the week ended Sept. 22, with the draw attributed in part to a surge in exports. “Hurricane Harvey disrupted refining operations in the Gulf Coast, which resulted in notable oil supply builds” because of lower refinery input demand, and sizable gasoline draws due to lower refinery runs, said Richey, in his daily newsletter. However, “operations seem to have stabilized based on this most recent EIA report.”

Analysts have noted that U.S. crude is seen as more attractive to foreign buyers after WTI moved to a wide discount to Brent crude in recent weeks. The discount briefly reached $7 a barrel earlier this week and remains near $6 a barrel. On the other hand, this “also gives U.S. oil producers an incentive to expand their production,” noted analysts at Commerzbank, in a note. Richey said oil’s “fundamental backdrop is shifting more in favor of the bulls for the time being.”

U.S. production has “finally cooled off,” expectations for demand growth have climbed and major oil producers taking part in the OPEC-led output agreement appear to be working toward further efforts to support oil prices, he said. “If WTI can break through key 2017 resistance at $54 [a barrel], futures should move swiftly towards the $60 mark.”