West Texas Intermediate fluctuated after the first decline in four days as the International Energy Agency cut its estimates for global oil demand. Prices headed for the fifth weekly advance in six.
Futures swung between gains and losses in New York after sliding 1.2 percent yesterday, the biggest loss in a week. The IEA trimmed its forecasts for demand in 2013 for a third month, predicting the weakest consumption in Europe in almost three decades. London-traded Brent’s premium to WTI narrowed to the smallest in more than 14 months yesterday.
“With demand not actually coming through in the economic numbers, we’ve had to correct and we’re now in neutral territory for both West Texas and Brent in technical terms,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney who predicts WTI may trade between $90 and $98 a barrel. “We’ll need some energy-specific news to get the market moving again.”
WTI for May delivery was at $93.28 a barrel, down 23 cents, in electronic trading on the New York Mercantile Exchange at 12:02 p.m. Singapore time. The volume of all futures traded was 10 percent below the 100-day average. The contract lost $1.13 to $93.51 yesterday, the most since April 4. Prices are up 0.6 percent this week and 1.6 percent higher this year.
Brent for May settlement, which expires April 15, rose 10 cents to $104.37 a barrel on the London-based ICE Futures Europe exchange. The more-actively traded June future climbed 12 cents to $104.50. The European benchmark grade was at a premium of $11.07 to WTI futures. It closed at $10.76 yesterday, the narrowest gap since Jan. 25, 2012.
Oil Demand
The IEA cut its estimate by 45,000 barrels a day, predicting that daily world consumption will increase by a “subdued” 795,000 barrels, or 0.9 percent, to 90.58 million this year. European demand will slump by 330,000 barrels a day. Still, an imminent recovery in refinery operations after maintenance and political threats to supply mean “it may be too early to call a bear market,” the IEA said yesterday.
While the IEA trimmed its forecast, Saudi Arabia expects world demand to rise about 1 million barrels a day this year, and exceed 90 million barrels a day “for the first time in history,” Ibrahim al-Muhanna, an adviser to Saudi Oil Minister Ali al-Naimi, said April 10 in Kuwait.
Technical Support
Oil in New York has technical support along its middle Bollinger Band on the weekly chart, around $91.45 a barrel, according to data compiled by Bloomberg. Futures halted last week’s decline near that level, signaling it’s where buy orders may be clustered. Losses tend to accelerate with a breach of chart support.
WTI may climb next week amid economic optimism, according to a Bloomberg News survey. Fourteen of 36 analysts and traders, or 39 percent, estimated crude will increase through April 19. Thirteen respondents predicted a decline and nine projected little change. U.S. jobless claims dropped more than forecast in the week ended April 6, Labor Department data showed yesterday.
Brent crude’s shift into contango for the first time in nine months will prove to be a brief event and offers an opportunity to bet on a price rebound, according to banks from Morgan Stanley to BNP Paribas SA.
Brent ‘Shift’
Front-month Brent futures are trading today at a discount to the next, a structure known as contango, for the fourth time in the past six days after North Sea production climbed with the end of oil field maintenance and as refiners curbed operations during a seasonal demand lull. Morgan Stanley predicts this “latest bout of Brent weakness will reverse,” while BNP Paribas recommends betting that the premium for short-term deliveries will strengthen again as supplies become constrained.
Brent futures for May settlement traded 3 cents a barrel less than the June contract on April 5, the first time since June 29 that the front month was cheaper than the subsequent contract. The contango between the two was at 15 cents today.
“The underlying factors that had loosened a bit in the Brent market will shift,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London, said in a telephone interview on April 9.
Source: Bloomberg
