On the New York Mercantile Exchange, Brent crude futures dropped 57 cents to $48.77, with U.S. West Texas Intermediate futures falling 48 cents to $45.94 per barrel, after reaching the day’s high of $46.78.
All the experts are saying that U.S. data on crude production and inventories, along with monthly reports from the Organization of Petroleum Exporting Countries (OPEC) and the U.S. Energy Information Administration (EIA) this week, should give investors a clear picture of how quickly global crude inventories are falling, says CNBC.
“We really need to see some of the data starting to support the idea that global inventory levels are coming down,” Saxo Bank senior manager Ole Hansen said. “Almost as importantly, there have been some signs that there has been some wavering in terms of demand growth.”
But, according to Market Watch, the slip back in trading seemed to be fueled by traders who were waiting for comments from OPEC members, hoping for hints on the cartel’s decision later this month on whether it will extend its production cut agreement.
The explanation? On Monday, OPEC “threw the kitchen sink at the market, trying different statements that ranged from extending cuts past the end of 2017 and deepening cuts—nothing worked,” said Bill Baruch, chief market strategist at iiTRADER. “Still, this jawboning will keep us bears on edge, and rightfully so given previous swings.”
However, as Reuters points out, high U.S. gasoline inventories have caused some concern because consumer spending expectations hit a three-year low in April, while new car sales have fallen year-on-year for four months in a row. Added to this, manufacturing activity is faltering and there has been a drop in commodity imports from China.
All this is going on, but even while OPEC has been sticking to its pledge to cut production, U.S. output has increased by over 10 percent since the middle of 2016, boosted by the shale sector, coming close to matching the total output of Russia and Saudi Arabia combined.
“U.S. oil production surpassed expectations in terms of an early bottoming and swift uptick, and is set to expand further based on the latest drilling momentum,” said Norbert Ruecker, head of macro and commodity research at Julius Baer.
“Oil appears to be moving into a $45.00 to $47.00 range, maybe $43.50 to $49.00 on the outside,” said Colin Cieszynski, chief market strategist at CMC Markets. “Supply data may spark short-term swings but I think it would take a really big surprise to knock it out of these ranges.”
