U.S. Oil Prices Slip From Four-Month High
19 March 2019 - 8:27PM
Dow Jones News
By Dan Molinski and Christopher Alessi
-- U.S. oil prices pulled back from a four-month high Tuesday
over concerns about the progress of U.S.-China trade negotiations
and as shale producers began hedging their output to lock in
relatively high prices.
-- West Texas Intermediate futures, the U.S. oil standard, ended
0.1% lower at $59.03 a barrel on the New York Mercantile Exchange.
The decline came after prices ended Monday at $59.09, the highest
closing price since Nov. 12.
-- Brent crude, the global oil benchmark, closed 0.1% higher at
$67.61 a barrel on London's Intercontinental Exchange.
HIGHLIGHTS
U.S.-China Trade: Oil prices had their sights set on a
$60-a-barrel level early in the session, rising to a fresh
four-month intraday high of $59.57 a barrel. But then a report from
Bloomberg indicated some U.S. officials are concerned that China
plans to roll back supposed earlier concessions as the two economic
giants try to iron out a yearlong trade dispute.
"That China trade headline came out and caused some
profit-taking on renewed worries of trade war that could lead to
reduced oil demand," said Phil Flynn, senior market analyst at
Price Futures in Chicago. Mr. Flynn added that with prices so close
to $60 a barrel, oil producers may have started hedging their
production to protect against any future price drops.
"We know that shale guys are desperate to lock in prices when
they get near these levels, and the $60 level is a big
psychological number, so that may be why we're stalling also," he
said.
OPEC+: Helping to fuel oil's earlier gains Tuesday was an
agreement Sunday by the Organization of the Petroleum Exporting
Countries and its allies outside the cartel to deepen their
crude-production cuts beyond the quota agreed on in December.
At a ministerial meeting in Baku, Azerbaijan, Saudi Arabia, the
de facto head of OPEC and the world's largest exporter of crude,
also indicated a willingness to maintain production curbs through
the end of the year to keep the oil market in balance.
Bjarne Schieldrop, chief commodities analyst at SEB Markets,
said the group of producers are highly likely to cut production in
the second half of this year if needed. "It clearly looks like
OPEC+ is successful in tightening up the crude oil market," he
said.
Russia Refusal: Despite the generally bullish tone, signs of
divisions in the OPEC+ group emerged this week, as Russia refused
to commit to production curbs beyond the first half of the year.
Russia's compliance with the cuts has lagged behind Saudi Arabia,
which has shouldered the bulk of the effort.
"It thus appears questionable whether Russia will achieve full
compliance by the end of March, as it has promised to do," analysts
at Commerzbank said.
INSIGHT
Bearish Pressures: Price Futures' Mr. Flynn said investors also
were reluctant to advance oil's recent rally until after
Wednesday's weekly oil report from the Energy Information
Administration is released. Analysts surveyed by The Wall Street
Journal on Tuesday pointed to a split in opinions over whether the
data will show a bullish drawdown in U.S. oil inventories, or a
bearish buildup.
Estimates from 11 analysts and traders surveyed showed U.S. oil
inventories are projected to have risen by 800,000 barrels, on
average, in the week ended March 15. Six of the 11 analysts expect
oil stockpiles to rise, while five expect a decline from the
previous week.
AHEAD
-- The American Petroleum Institute, an industry group, releases
weekly data on U.S. oil inventories at 4:30 p.m. EDT, followed by
official data from the EIA on Wednesday at 10:30 a.m. EDT.
Write to Dan Molinski at Dan.Molinski@wsj.com and Christopher
Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
March 19, 2019 16:12 ET (20:12 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.