Fear over oil correction impairs crude’s best rally in seven years

Bloomberg

Oil’s sinking back down to earth. Euphoria that’s driven the longest monthly rising streak in almost seven years is giving way to concern that US stockpiles will rebound as the rally encourages American drillers. That’s sparked a 3.1 percent drop in New York futures this week, marring crude’s best January since 2013. The sour sentiment is bleeding into equities, with energy stocks spurring losses on the MSCI All-Country World Index over the past two sessions.
Ten consecutive weekly declines in American stockpiles have helped crude breach $66 a barrel for the first time since December 2014.
Oil’s fifth consecutive monthly gain has also been driven by a weaker dollar amid conflicting remarks on the currency from President Donald Trump and his top officials. In his first State of the Union address, he said the US has ended the “war” on energy, and that it’s an “exporter of energy to the world.”
“The market is starting to focus on the upcoming US refinery maintenance period, which will see demand soften,” said Daniel Hynes, a Sydney-based analyst at Australia & New Zealand Banking Group Ltd. “Thus, expectations are building for an increase in inventory in the US However, with the global market tightening up, exports should remain strong and thus limit the build.”
West Texas Intermediate for March lost as much as 83 cents to $63.67 a barrel on the New York Mercantile Exchange, and was at $64.12 at 4:21 p.m. in Tokyo. The US benchmark crude fell 1.6 percent to close at $64.50, the biggest decline since Dec. 6. Total volume traded was about 35 percent above the 100-day average. Front-month futures are up about 6 percent this month.
Brent for March settlement was at $68.70 a barrel on the London-based ICE Futures Europe exchange, down 32 cents. Prices slipped 0.6 percent to $69.02. The more-active April contract dropped 32 cents to $68.20. Front-month futures have risen about 2.7 percent in January. The global benchmark crude traded at a premium of $4.58 to WTI. US crude stockpiles climbed by 3.23 million barrels last week, the American Petroleum Institute was said to report.
Inventories probably rose by 900,000 barrels to 412.5 million, according to Bloomberg survey before Energy Information Administration data.
Meanwhile, American oil production climbed to 9.88 million barrels a day in the week ended Jan. 19, the highest level in weekly EIA data since 1983.
Gasoline inventories rose by 2.69 million barrels last week, while distillates fell, according to the API report.
Front-month gasoline futures on the Nymex are set for a 4.5 percent gain in January, a second monthly increase, while diesel futures are headed for a 0.5 percent drop to $2.0652 a gallon this month, ending a sixth consecutive monthly advance.
The Bloomberg Dollar Spot Index, a gauge of the currency against 10 major peers, has declined about 3.5 percent this month, while the Bloomberg Commodity Index that measures returns on 22 basic resources from crude to copper climbed 2.3 percent in January.