Oil loses momentum after weekly rally

Oil loses momentum after weekly rally copy



Oil is losing momentum after the longest weekly rally in two months, with confidence that US crude stockpiles are beginning to shrink damped by concern that American drilling activity is increasing.
Futures were little changed in New York after falling 1 percent Monday, following its third weekly advance. While data on Wednesday may show US inventories probably shrank for a second week, drillers in the nation have added rigs for the past 13 weeks. Citigroup Inc. says output cuts by OPEC will be able to offset the response from American producers to higher prices. Goldman Sachs Group Inc. has called for the market to be patient.
Stockpiles will start to decline significantly as supply cuts from the Organization of Petroleum Exporting Countries continue, Citi said in a report. Oil had rallied above $53 a barrel after some producers voiced support for prolonging a six-month production curb by OPEC and its allies past June.
“The market has had a good run higher amid Middle East tensions and increased confidence that OPEC will extend its production agreement beyond six months,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “While US inventories are going to decline, they are falling from a much higher level than they have over the past two years. We’re also back into a price area that may attract more shale oil production.”
West Texas Intermediate for May delivery was at $52.62 a barrel on the New York Mercantile Exchange, down 3 cents, at 7:50 a.m. in London. Total volume traded was about 36 percent below the 100-day average. Prices lost 53 cents to $52.65 on Monday, the lowest close since April 7. Brent for June settlement was 2 cents lower at $55.34 a barrel on the London-based ICE Futures Europe exchange. Prices dropped 53 cents, or 1 percent, to $55.36 on Monday. The global benchmark traded at a premium of $2.27 to WTI.
US crude inventories probably shrank by 1.7 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. Stockpiles climbed to 535.5 million barrels at the end of March, the highest in weekly data compiled by Bloomberg since 1982. Oil producers are showing “very good” compliance with pledged production cuts, Saudi Arabia’s Energy Minister Khalid Al-Falih said Monday in Riyadh. While global supplies are rising because of refinery maintenance, the market is rebalancing, he said. Crude output at major US shale plays is forecast to climb to 5.2 million barrels a day in May, the highest since November 2015, according to the EIA’s monthly Drilling Productivity report.

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