By Eric Yep
Oil prices were marginally higher in Asian trade Wednesday,
attempting a rebound after sharp losses of nearly 3% in the
previous session on the back of a strong U.S. dollar.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in July traded at $58.35 a barrel at 0324 GMT, up
$0.32 in the Globex electronic session. July Brent crude on
London's ICE Futures exchange rose $0.15 to $63.87 a barrel.
However, strength in the greenback continues to weigh on oil
prices. Market participants have raised concerns about the
inability of the oil market to sustain its latest price rally.
"At least for the time being, the strength in the U.S. dollar
has called attention away from declining U.S. petroleum
inventories," analyst Tim Evans at Citi Futures said.
He said while the upcoming meeting of the Organization of the
Petroleum Exporting Countries in early June will drive oil market
balances, there's no question that recent oil price movement has
been tied to swings in the U.S. dollar.
"When the dollar is strong, the dollar is the preferred store of
value. But when the dollar is weak, money managers would rather
hold commodities, all else being equal," Mr. Evans said.
The U.S. dollar index has rallied for three consecutive sessions
and is at its strongest in a month due to Greece debt default
concerns and higher U.S. interest rates expected later this
year.
Traders continue to watch developments in the Middle East and
oil demand-supply indicators for more cues, especially since the
market is divided over the near-term direction of oil prices.
One of the key supports for oil prices in the first quarter of
this year was a surge in speculative net long positions, or bets
that prices will rise, in Brent crude.
But a sharp decline recently in speculative positions in Brent
could indicate a shift towards bearish sentiment, and further
unwinding of these positions would remove a key pillar of support
to oil prices, analysts at BMI research said.
In the week ending May 19, net long positions of money managers
fell for the second consecutive week by 13.4%, the sharpest
pullback since July 2014.
"In our view, a rapid liquidation of long positions in the Brent
futures market would likely trigger a downswing in the price," BMI
said. It expects Brent crude to average $59 a barrel for 2015.
Nymex reformulated gasoline blendstock for June--the benchmark
gasoline contract--rose 14 points to $1.9997 a gallon, while June
diesel traded at $1.8999, 3 points lower.
ICE gasoil for June changed hands at $584.75 a metric ton, down
$0.50 from Tuesday's settlement.
Write to Eric Yep at eric.yep@wsj.com