Oil Prices Up but Mood Is Still Down

By Alison Sider and Neanda Salvaterra Features Dow Jones Newswires

Crude futures wavered between gains and losses on Monday, as investors weighed the relentless growth in U.S. oil output against efforts by major global producers to reduce supply.

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U.S. crude futures for August delivery were recently up 31 cents, or 0.72%, at $43.32 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 21 cents, or 0.46%, to $45.75 a barrel on ICE Futures Europe.

The move higher reversed the declines in earlier trading. Bargain hunters have stepped in at times after crude futures slipped into a bear market last week.

"Sentiment is too bearish and the market is very vulnerable to a short covering rally," the Chicago brokerage iiTrader wrote to clients in a note Monday. "We remain fundamentally longer-term bearish, but in the near term this market is very susceptible to rallies."

Analysts at Commerzbank said oil's move higher was likely a "technical countermovement" after U.S. oil prices hit a 10-month low and global prices hit a seven-month low last week.

"The news remains negative," the analysts wrote.

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The faith investors had at the beginning of the year that oil prices would climb higher has all but evaporated. Last week, hedge funds and other money managers piled into new bets on falling prices, according to the Commodity Futures Trading Commission.

"This puts investor optimism at its lowest level since August 2016," the Commerzbank analysts wrote.

The Organization of the Petroleum Exporting Countries and a handful of nations outside the cartel have cut global supply by about 2%. But since the beginning of the year, investors have grown concerned that rising output in OPEC members exempt from the deal, such as Libya and Nigeria, and outside producers including the U.S., has undercut the oil cartel's efforts.

The latest data from oil-services firm Baker Hughes Inc. showed U.S. shale producers added 11 more rigs, marking the 23rd weekly rise and the longest streak of increases in decades.

"Adherence to quotas has thus far been impressive but the impact of such has been offset by virtually uninterrupted gains in shale production and increases within other non-OPEC regions that have helped to slow our expected contraction in the U.S. crude supply surplus against the averages," Jim Ritterbusch, president of Ritterbusch & Associates, wrote in a research note.

Gasoline futures rose 0.36 cent, or 0.25%, to $1.4377 a gallon. Diesel futures rose 0.79 cent or 0.58%, to $1.3796 a gallon.

Write to Alison Sider at alison.sider@wsj.com and Neanda Salvaterra at neanda.salvaterra@wsj.com

Crude futures rose for a third consecutive session Monday, as investors weighed the relentless growth in U.S. oil output against efforts by major global producers to reduce supply.

U.S. crude futures for August delivery settled up 37 cents, or 0.86%, at $43.38 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 29 cents, or 0.64%, to $45.83 a barrel on ICE Futures Europe.

Even though oil prices have made small gains in recent days, prices are still languishing at some of their lowest levels of the year. Crude futures slipped into a bear market last week, down more than 20% from their highs hit in February.

"I just think you're exhausting the selling. It's fallen a long way," said Bill O'Grady, chief market strategist at Confluence Investment Management.

Some analysts said recent gains are likely the result of bargain buying and technical factors, but expect oil prices to remain range-bound.

"Sentiment is too bearish and the market is very vulnerable to a short covering rally," the Chicago brokerage iiTrader wrote to clients in a note Monday. "We remain fundamentally longer-term bearish, but in the near term this market is very susceptible to rallies."

The faith investors had at the beginning of the year that oil prices would climb higher has all but evaporated. Last week, hedge funds and other money managers piled into new bets on falling prices, according to the Commodity Futures Trading Commission.

"This puts investor optimism at its lowest level since August 2016," analysts at Commerzbank wrote.

The Organization of the Petroleum Exporting Countries and a handful of nations outside the cartel have cut global supply by about 2%. But since the beginning of the year, investors have grown concerned that rising output in OPEC members exempt from the deal, such as Libya and Nigeria, and outside producers including the U.S., has undercut the oil cartel's efforts.

The latest data from oil-services firm Baker Hughes Inc. showed U.S. shale producers added 11 more rigs, marking the 23rd weekly rise and the longest streak of increases in decades.

"Adherence to quotas has thus far been impressive but the impact of such has been offset by virtually uninterrupted gains in shale production and increases within other non-OPEC regions that have helped to slow our expected contraction in the U.S. crude supply surplus against the averages," Jim Ritterbusch, president of Ritterbusch & Associates, wrote in a research note.

Gasoline futures rose 0.46 cent, or 0.32%, to $1.4387 a gallon. Diesel futures rose 0.85 cent, or 0.62%, to $1.3802 a gallon.

Write to Alison Sider at alison.sider@wsj.com and Neanda Salvaterra at neanda.salvaterra@wsj.com

(END) Dow Jones Newswires

June 26, 2017 15:48 ET (19:48 GMT)