Oil At Two Week Low

By Christopher Alessi Features Dow Jones Newswires

Oil prices slid Wednesday morning, as investors continued to cash in on last week's bullish market and retrace crude's upward march.

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Brent crude, the global benchmark, was down 0.71%, at $55.60 a barrel on London's Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate Futures were trading down 0.60%, at $50.13 a barrel.

The price of Brent nearly hit $60 a barrel last week but has since come down by around 6% after "edgy traders" reversed bullish positions to take profits, according to Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd.

"A return of the recent feel-good factor now seems like a distant prospect and any price gains will be hard won," Mr. Brennock noted.

Crude prices had been boosted in part last week by an independence referendum in Iraq's semiautonomous Kurdistan region. In response, neighboring Turkey, which opposed the move, threatened to block roughly 500,000 barrels a day of Kurdish crude exports. That potential supply disruption to the global market sent prices north.

But the market "moved prematurely on news of the Kurdish referendum, which was nonbinding," said Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas.

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Mr. Tchilinguirian said investors were perhaps also factoring in macroeconomic shifts on the horizon, including an expected slowdown in Chinese growth in the second half of the year. China is the one of the world's largest consumers of commodities like crude oil.

The spike in the price of Brent last month was also "driven to a large extent by speculation," according to analysts at Commerzbank. "Brent is showing more and more signs of speculative excess," the analysts wrote in a note Wednesday.

Meanwhile, analysts and investors will be looking ahead to weekly inventory data from the U.S. Energy Information Administration, to be released Wednesday afternoon. Preliminary estimates Tuesday from the American Petroleum Institute, an industry group, showed a 4.1 million barrel decrease in crude supplies, a 4.2 million barrel increase in gasoline stocks and a 600,000 barrel decline in distillate inventories, for the week ended Sept. 29.

Among refined products, Nymex reformulated gasoline blendstock--the benchmark gasoline contract--was up Wednesday by 0.66%, at $1.57 a gallon. ICE gasoil, a benchmark for diesel fuel, changed hands at $519.25 a metric ton, down 1.38% from the previous settlement.

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

Oil prices fell to a two week low Wednesday as investors continued to cash in on last week's bullish market and retrace crude's upward march.

U.S. crude futures tumbled 44 cents, or 0.87%, to $49.98 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 20 cents, or 0.36%, to $55.80 a barrel on ICE Futures Europe.

The move lower came despite what analysts said was bullish data on oil storage levels. The U.S. Energy Information Administration reported that crude stockpiles shrank by 6 million barrels last week, exceeding the 300,000 barrel decline analysts were expecting, as foreign buyers clamored for cargoes of U.S. crude.

But some market participants have doubts that the declines will continue, said Gene McGillian, research manager at Tradition Energy. Fuel demand eased last week, according to the EIA figures, and U.S. oil output edged higher.

"For the bears in the market, the concern is that maybe some of the strong demand we saw might be pulled out of the market as we get further from summer driving season," Mr. McGillian said. "I think the market is showing signs that the rally has exhausted itself for the time being."

A big jump in shipments of U.S. crude abroad helped drain oil inventories, but some expect the recent surge in exports will be temporary, as it reflects how Hurricane Harvey temporarily pushed U.S. prices lower while global prices kept climbing.

U.S. crude oil exports surged to 1.984 million barrels a day -- an increase of close to 500,000 barrels a day from the previous week's level, which was also a record.

Kyle Cooper, a consultant at Ion Energy Group, said Wednesday's data was largely bullish, but perhaps not enough to attract many new buyers, as speculative investors have already made big bets on rising oil prices.

"It looks like there wasn't enough good stuff to bring more buyers into the market," Mr. Cooper said.

The price of Brent nearly hit $60 a barrel last week but has since come down by around 6% after "edgy traders" reversed bullish positions to take profits, according to Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd.

"A return of the recent feel-good factor now seems like a distant prospect and any price gains will be hard won," Mr. Brennock noted.

The spike in the price of Brent last month was also "driven to a large extent by speculation," according to analysts at Commerzbank. "Brent is showing more and more signs of speculative excess," the analysts wrote in a note Wednesday.

The U.S. data Wednesday showed that gasoline stockpiles rose by 1.6 million barrels. Total inventories of petroleum products fell 6.1 million barrels.

Gasoline futures rose 1.5 cents, or 0.96%, to $1.5805 a gallon. Diesel futures gained 2.34 cents, or 1.34%, to $1.7739 a gallon.

Write to Alison Sider at alison.sider@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

(END) Dow Jones Newswires

October 04, 2017 15:52 ET (19:52 GMT)