Oil price rises on covering ahead of contract expiry
Crude oil futures have advanced so far in today’s trading as speculators covered their positions ahead of the expiration of April contracts. Any gains however, are likely to remain capped by a robust dollar and a build in US crude inventories.
Brent for April delivery had risen 0.71 percent, or 41 cents, to $57.95 per barrel as of 08:01 GMT on the London-based ICE Futures Europe exchange. The benchmark rallied over 2.4 percent during the previous session on the back of technical correction and ahead of the expiry of the April contract. Reuters quoted Victor Shum, vice president of IHS Energy in Singapore as saying:
“When contracts expire there is more uncertainty and volatility associated with oil. For investors speculating, directionally WTI seems to be facing more pressure heading down. Brent will move upwards”. The April contracts for both major benchmarks Brent and WTI are due to expire next week on Monday and Friday respectively.
April WTI futures had gained 33 cents, or 0.69 percent, to $48.50 a barrel in electronic trading on the NYMEX in New York as of 08:01 GMT. US crude diverged from Brent yesterday, settling 37 cents down following the release of the weekly inventory report from the Energy Information Administration (EIA).
The Washington-based agency said that US crude-oil inventories rose by 4.5 million barrels to 448.9 million barrels in the week to March 6. The Wall Street Journal cited a report from Societe Generale: “Our view is that there is more downside than upside to crude prices in the near term, due to ample crude supplies and seasonal weakness in refinery crude runs, due to planned maintenance”.
Based on the two front month contracts, Brent was trading at a premium of $9.45 to WTI as of 08:01 GMT. The premium has declined from the one year peak of $13 a barrel touched last week.