By Timothy Puko
Oil prices faded, undoing a small rally Friday as traders showed
skepticism that a surge of U.S. production is leveling off.
Several banks and analysts are warning that oil's steady gains
this month came from a false premise of sputtering production. U.S.
producers aren't shutting down rigs as quickly as they once were
and several countries around the world are trying to put more of
their crude onto the market.
"There's not necessarily a lot of belief in the front of the
market," said Ric Navy, senior vice president for energy futures at
brokerage R.J. O'Brien & Associates LLC. "We're still over
supplied."
Light, sweet crude for May delivery settled down 97 cents, or
1.7%, to $55.74 a barrel on the New York Mercantile Exchange. It
snapped a six-session winning streak, although prices are still
near the 2015-high set on Thursday. It finished the week up 7.9%,
and its gains during a five-week winning streak are the largest
percentage gains for a five-week period since 2009.
Brent, the global benchmark, fell 53 cents, or 0.8%, to $63.45 a
barrel on ICE Futures Europe.
Oil's big gains from earlier in the week came from a series of
data that suggested slowing supply and growing demand would
rebalance a glutted market. Rig counts are still falling, but not
quickly enough to add to those beliefs on Friday. Prices barely
moved after the Baker Hughes weekly rig update, which showed a more
modest decline than the previous week at 26, putting the total U.S.
oil-rig count at 734.
There was very little clear direction in prices or sentiment,
analysts said. They pointed to several factors including chart
momentum, a stock selloff, the Greek debt crisis, war in the Middle
East and moves in the dollar as influential factors.
"There's just a whole mix of stuff that is going to lead to wide
price swings," said Jim Ritterbusch. U.S. oil prices could rise to
$60 a barrel next week, and "easily" fall back to $44, he
added.
Many analysts are warning not to get overly bullish because of
the oil market's resilience. Many countries around the world are
poised to increase supply, which could offset signs that
consumption is on the rise, Bank of America Merrill Lynch said.
"Global oil demand is a bit better than last year, but stocks
are still building and the recent run up in prices could lose steam
sooner rather than later," said Bank of America Merrill Lynch. The
bank sees crude WTI prices at end of the second quarter at $41, and
Brent at $48. Brent for June delivery is 1.2% lower at $63.21.
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