By Eric Yep
Crude-oil futures were lower in European trade on Monday as
investors weighed supply-demand fundamentals amid weakening
confidence in the latest price rally.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in June traded at $56.77 a barrel at 1004 GMT, down
$0.4. June Brent crude on London's ICE Futures exchange fell $0.4
to $64.88 a barrel.
Nymex West Texas Intermediate crude lost a marginal 0.3% last
week, snapping a five-week winning streak, while Brent crude gained
2.9% last week and has been up for three consecutive weeks, rising
by 18.8%.
While Brent crude has been supported by Saudi Arabia's military
action in Yemen, U.S. oil prices have been under some pressure
lately after weekly stockpiles rose despite expectations that U.S.
oil production may begin slowing soon.
But oil is still trading near its highest level seen this
year.
"Sustaining the recent oil price rally requires firmer demand
and a tangible supply response. The cart is moving ahead of the
horse, and we take a cautious view on further price appreciation
over the near term," Barclays analyst Michael Cohen said in a
report.
He said there is little evidence to suggest that a broad pickup
in consumption is occurring, while on the supply side agency
forecasts released in the past month show shale growth could
materialize again if oil prices stay in the $60-$70 price
range.
Bank of America Merrill Lynch said it sees WTI prices returning
to $50 a barrel as refinery maintenance kicks in again in
September. After that, it sees a recovery to $57 a barrel by
year-end.
"Initially, the oil market surplus was reflected in large
increases in crude inventories, placing downward pressure on crude
oil prices, timespreads and differentials," the bank's analysts
wrote. "Now we are about to see petroleum products building as
refineries ramp up after maintenance."
A few other indicators also signal that the current crude-price
rally may be running out of gas.
Exchange-traded funds that invest in U.S. oil futures, including
the $3.1 billion United States Oil Fund LP, have registered about
$2.7 billion of investor outflows this month, according to
investment bank Macquarie Group Ltd. These ETFs took in roughly $6
billion this year through mid-March, when the U.S. oil benchmark
hit a six-year low.
Meanwhile, striking workers have shut down an important Libyan
oil field in a dispute over wage payments, a Libyan official said
Sunday. The field is jointly run by Italian energy giant Eni SpA
and Libya's National Oil Co.
Later this week, financial markets will be focused on the U.S.
Federal Open Market Committee meeting on Wednesday.
Nymex reformulated gasoline blendstock for May--the benchmark
gasoline contract-was flat at $1.9918 a gallon. ICE gasoil for May
changed hands at $585.00 a metric ton, down $2.25 from Friday's
settlement.
Summer Said contributed to this article
Write to Eric Yep at eric.yep@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires