Oil Falls on Demand Concerns

By Christopher Alessi Features Dow Jones Newswires

Oil prices were mainly flat in London trading Tuesday, one day after

Continue Reading Below

hitting a three-week low on data showing increased U.S. shale production

and a decline in Chinese refinery demand.

-- Brent crude futures--the global benchmark--hovered around $50.76 a

barrel. West Texas Intermediate crude futures oscillated around $47.64 a

barrel on the New York Mercantile Exchange.

Continue Reading Below

-- "Shale is still rising strongly," said Olivier Jakob, an oil analyst at

Petromatrix. Investors are questioning whether WTI can "move above $50,

with the capacity how it is in the U.S.," he said. However, the market is

relatively flat this morning because "there is nothing really new."

-- JBC Energy analysts predict higher crude exports out of the U.S. to "put

renewed pressure on crude markets in the rest of the Atlantic Basin."

Write to Christopher Alessi at christopher.alessi@wsj.com

Oil prices dropped on Tuesday, weighed down by concerns over demand and a rising U.S. dollar.

Light, sweet crude for September delivery lost 31 cents, or 0.6%, to $47.28 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 41 cents, or 0.8%, to $50.32 a barrel.

Prices fell for the second day in a row after Chinese refiners cut back on crude processed and a strong dollar weighed on commodities prices. The WSJ Dollar Index was recently up 0.6%, trading at the highest level in nearly three weeks.

The summer rally that took prices up to $50 a barrel has lost steam, even as the amount of oil in U.S. storage has continued to decline.

In part, prices have stalled because investors are worried about whether there will be enough demand to soak up excess oil, especially as U.S. shale producers have increased activity and members of the global oil cartel show signs of slipping compliance with production cuts agreed on last year.

Recently, Chinese data showed a drop in July consumption as refiners processed less crude into products.

"We're still seeing a decent reaction to the data out of China," said John Kilduff, founding partner at Again Capital. "That was a big blow to the demand argument."

A surprise build in gasoline stockpiles in the week ended Aug. 4 has also put pressure on the market. As the summer driving season comes to a close, some investors are worried that dwindling demand for products will hurt the crude market.

"We're about to head into a period where some of these strong global crude runs are going to diminish. Perhaps the market is beginning to take that into account," said Andy Lebow, senior partner at Commodity Research Group.

The Organization of the Petroleum Exporting Countries, along with other major oil-producing nations, agreed to limit output late last year, in an attempt to cut down on oversupply. But July data showing a rise in OPEC production has helped undermine faith in the cartel's ability to rebalance the global oil market.

Traders are also watching to see whether Saudi Arabia's plans to cut exports will help ease the global supply glut.

"That's going to be a key to whether this market will hold up or not," Mr. Kilduff said. For now, "tanker data doesn't look like they're doing that."

Write to Stephanie Yang at stephanie.yang@wsj.com

(END) Dow Jones Newswires

August 15, 2017 11:51 ET (15:51 GMT)