Crude Oil Turns Lower as Rally Stalls

Oil prices largely held on to their gains on Thursday on reports that U.S. crude stockpiles declined, despite some profit-taking from investors who cashed in on the recent rally.

Brent crude, the global oil benchmark, rose 0.40% to $58.14 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.15% at $52.22 a barrel.

Oil prices have been climbing in the past few weeks on the back of a tightening market after Hurricane Harvey knocked out a sizable amount of U.S. refinery capacity and amid an action by major oil producers to eliminate the global supply glut.

Crude was bolstered by data released on Wednesday showing U.S. crude oil stocks fell unexpectedly by 1.8 million barrels last week.

The downward move was attributed to a 1 million barrel a day increase in crude oil processing by U.S. Gulf Coast refineries that are ramping up their production again, "after the hurricane-enforced break," said Commerzbank analysts in a recent note.

However, "Brent is still under downward pressure due to profit-taking."

Brent remained about $1 below the two-year high it achieved on Monday when it hit its highest settlement since July 2015 and closed at $59.02 a barrel.

Investors are seizing upon the opportunity to buy other crude grades that haven't appreciated as much as Brent, analysts said.

"Brent has overrun quite a bit relative to WTI. We are seeing very stretched differentials," said Miswin Mahesh, an oil market analyst at Energy Aspects. "Refineries can choose to switch grades from sweet to Russian sour crudes where they can actually make a better margin."

But U.S. crude shipments to Europe are causing the margins to narrow. Official data showed U.S. crude exports rose to about 1.5 million barrels a day last week, "the highest level registered since the lifting of the crude export ban," said analysts for JBC Energy in a recent note.

As U.S. refinery activity picks up analysts project the gap between WTI and Brent may move back below $5 a barrel, which may also lessen the incentive for arbitrage.

Recently prices have also been bolstered by a renewed faith in the Organization of the Petroleum Exporting Countries' plan to rebalance the market through its production-cut agreement.

OPEC and 10 producers outside the cartel first agreed late last year to cap production at around 1.8 million barrels a day lower than peak October 2016 levels, part of an effort to alleviate the global oil glut and boost prices. The deal was extended in May through March 2018

After a meeting last Friday in Vienna, the oil cartel estimated that compliance with the deal to cut global supply reached 116% in August. OPEC also said that commercial inventories have fallen by nearly half of the target since the beginning of 2017.

Overall U.S. crude oil production increased last week by 37,000 barrels to reach 9.55 million barrels a day, a bit under its peak in 2015, a worrisome trend for oil prices according to some analysts.

On Friday investors will be watching for data from the oil-services firm Baker Hughes Inc., which releases its count of active drilling rigs, a bellwether for production in the U.S. oil industry.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.30% to $1.62 a gallon. ICE gasoil changed hands at $554.50 a metric ton, up $5.75 from the previous settlement.

Write to Neanda Salvaterra at neanda.salvaterra@wsj.com

Oil prices flipped from gains to losses Thursday, erasing much of this week's advances as investors cashed in and took profits.

Prices had been on the rise earlier Thursday following U.S. data Wednesday showing that record high exports of U.S. crude and additional demand from refineries as they come back online following Hurricane Harvey helped drain 1.8 million barrels from U.S. crude inventories last week, the U.S. Energy Information Administration reported Wednesday.

But investors pulled back, sending oil prices tumbling amid concerns that the rally had gone too far.

"I think more than anything there was some profit-taking here," said Tariq Zahir, managing member of Tyche Capital Advisors. "It's had a heck of a run."

U.S. crude futures fell 78 cents, or 1.5%, to $51.36 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 71 cents, or 1.23%, to $57.19 a barrel on ICE Futures Europe.

Oil prices have been climbing the past few weeks amid renewed faith in the efforts of the Organization of the Petroleum Exporting Countries and other major oil producers to eliminate the global supply glut.

But bearish factors are on the horizon: U.S. production has continued to rise and producers could take advantage of the higher prices to ramp up more quickly.

Oil's recent rally represents a return to "the optimism we saw earlier in the year, that the reduction of supply through the 1.8 million [barrel] cut is basically taking hold and tightening the market," said Gene McGillian, research manager at Tradition Energy.

Still, he said the market could be vulnerable to a selloff if data in the coming weeks don't continue to show the glut of oil is shrinking.

U.S. and global oil benchmarks have diverged in recent weeks, with the gap between the two trading at its widest in more than two years.

Brent has been bolstered by tightening supplies abroad. This week it also jumped on fears that the Iraqi Kurdish independence referendum would lead to conflicts that could interrupt the flow of Kurdish oil. West Texas Intermediate, the U.S. reference price, has lagged as U.S. fuel makers were hobbled by Hurricane Harvey and unable to process as much crude.

The price gap has led to a surge of exports from the U.S. as buyers take advantage of the discount. U.S. crude exports rose to a record 1.5 million barrels a day last week, according to the U.S. Energy Information Administration.

"The only real crude surplus left is in the U.S., and, as we whittle down the last of the stored barrels, the world is turning to the U.S. as the supplier of last resort," Energy Aspects analysts wrote in a research note.

Gasoline futures fell 2.94 cents, or 1.78%, to $1.6246 a gallon. Diesel futures fell 1.92 cents, or 1.04%, to $1.8271 a gallon.

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

Oil prices moved into the red, erasing much of this week's gains as investors took profits.

Prices had been on the rise earlier Thursday following concerns that Iraqi Kurdistan's independence vote could hit supply from the oil-rich region and after U.S. data Wednesday showed that record-high exports of U.S. crude and additional demand from refineries helped drain 1.8 million barrels from U.S. crude inventories last week.

But investors pulled back, sending oil prices tumbling amid concerns that the rally had gone too far.

"I think more than anything there was some profit-taking here," said Tariq Zahir, managing member of Tyche Capital Advisors. "It's had a heck of a run."

U.S. crude futures fell 58 cents, or 1.11%, to $51.56 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 49 cents, or 0.85%, to $57.41 a barrel on ICE Futures Europe.

Prices also tumbled after data-tracking firm Genscape said storage at the Cushing, Okla., storage hub rose to 65.1 million barrels, up by close to 2 million barrels from Friday.

Oil prices have been climbing the past few weeks amid renewed faith in the efforts of the Organization of the Petroleum Exporting Countries and other major oil producers to eliminate the global supply glut.

But bearish factors are on the horizon: U.S. production has continued to rise and producers could take advantage of the higher prices to ramp up more quickly.

Oil's recent rally represents a return to "the optimism we saw earlier in the year, that the reduction of supply through the 1.8 million [barrel] cut is basically taking hold and tightening the market," said Gene McGillian, research manager at Tradition Energy.

Still, he said the market could be vulnerable to a selloff if data in the coming weeks don't continue to show the glut of oil is shrinking.

U.S. and global oil benchmarks have diverged in recent weeks, with the gap between the two trading at its widest in more than two years.

Brent has been bolstered by tightening supplies abroad. This week it also jumped on fears that the Iraqi Kurdish independence referendum would lead to conflicts that could interrupt the flow of Kurdish oil. West Texas Intermediate, the U.S. reference price, has lagged behind as U.S. fuel makers were hobbled by Hurricane Harvey and unable to process as much crude.

The price gap has led to a surge of exports from the U.S. as buyers take advantage of the discount. U.S. crude exports rose to a record 1.5 million barrels a day last week, according to the U.S. Energy Information Administration.

"The only real crude surplus left is in the U.S., and, as we whittle down the last of the stored barrels, the world is turning to the U.S. as the supplier of last resort," Energy Aspects analysts wrote in a research note.

Some expect oil prices to continue to rise.

"We are still viewing this as a near term bull market capable of fresh highs," Jim Ritterbusch, president of Ritterbusch & Associates, wrote in a client note. "We expect an upside reversal tomorrow amidst various contract expirations."

Gasoline futures fell 2.22 cents, or 1.34%, to $1.6318 a gallon. Diesel futures fell 1.43 cents, or 0.77%, to $1.832 a gallon.

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

(END) Dow Jones Newswires

September 28, 2017 15:59 ET (19:59 GMT)