Oil price falls from two-month high following recent rally

on Feb 18, 2015
Updated: Oct 11, 2019

Crude oil futures have dipped so far in today’s trading following the recent rally that pushed crude to its highest level since mid-December. Market participants will now await the release of weekly US inventory data for further cues amid thin trading as several Asian countries began their Lunar New Year holidays which last for the rest of the week.

Brent for April delivery had shed 38 cents, or 0.61 percent, to $62.15 per barrel as of 07:03 GMT on the London-based ICE Futures Europe exchange. Yesterday, the contract settled at $62.29 per barrel, its highest close since 11 December, and has advanced over 10 percent since the start of the year.
Crude prices have rallied in recent weeks, with Brent gaining 37.8 percent from its near six-year low of $45.19, while Nymex West Texas Intermediate crude is up around 20 percent over the same period. The Wall Street Journal cited Citi Futures analyst Tim Evans as saying that although Brent is treading at levels not seen since December, there’s concern that the global oil surplus will eventually pressure oil prices. According to him: “The weaker performance of the [Nymex] market relative to Brent represents at least some degree of recognition that US crude oil inventories are trending higher”.

March WTI futures had slid 0.67 percent, or 36 cents, to $53.17 in electronic trading on the NYMEX in New York as of 07:03 GMT. Last week, US oil stockpiles rose to a record high of 417.9 million barrels. The weekly report from the American Petroleum Institute (API) is due later today, while the US Energy Information Administration (EIA) will release data tomorrow. Reuters quoted ANZ Bank as saying today that US crude inventories are expected “to increase further in the near term as US refinery outages weaken US crude demand”.

Based on the two front month contracts, Brent was trading at a premium of $8.98 to WTI as of 07:03 GMT. US crude prices are trading at their biggest discount to Brent since August last year. According to analysts, the increase in Brent’s premium is largely due to instability in the Middle East. Reuters cited JBC Energy as saying: “Geopolitical developments are heating up in the MENA (Middle East, North Africa) region again”.