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Futures Movers: Oil prices struggle for direction as traders mull demand cues, supply prospects

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Oil futures lacked direction on Monday, with prices seesawing between losses and gains as traders mulled the latest signals for crude demand outlook, as well as prospects for global supplies.

Crude prices searched for direction “after last week saw crude and product futures take a decisive turn higher,” said Robbie Fraser, global research and analytics manager at Schneider Electric.

“As global crude stocks continue to track close to pre-COVID levels, last week’s support was tied primarily to broader economic strength,” he said in a note.

On the bearish side, however, the U.S. and Iran “appear to have made progress in the latest round of talks surrounding U.S. sanctions and the Iranian nuclear deal, despite a recent threat by Iran to enrich uranium up to weapons-grade levels,” said Fraser. A return to the 2015 nuclear deal could open the door for 2 million barrels a day of Iranian exports, he said.

Read: Why oil traders should keep an eye on Iran even as nuclear talks look unproductive

West Texas Intermediate crude for May delivery
CL.1,
-0.14%

CLK21,
-0.14%

fell 3 cents, or 0.05%, to $63.10 a barrel on the New York Mercantile Exchange. June Brent crude
BRN00,
-0.28%

BRNM21,
-0.28%
,
the global benchmark, was off 14 cents, or 0.2%, at $66.63 a barrel on ICE Futures Europe.

Prices for both crude benchmarks ended Friday with gains of more than 6% for the week.

“We can certainly see some risks on the demand side: in emerging economies in particular, which are responsible for a large part of the recovery in demand, numbers of new COVID-19 infections have jumped sharply of late, which could jeopardize the economic recovery there,” wrote Eugen Weinberg, commodity analyst at Commerzbank, in a note.

“This is presumably why demand for fuel in India, the world’s third-largest crude oil importer, has declined again recently,” he said, noting data from state refinery companies that showed diesel demand in the first half of April fell 3% to 1.38 million barrels a day. Meanwhile, gasoline demand, which tends to track private consumption, dropped by 5% to 561,000 barrels a day, he noted.

India has replaced Brazil as the country with the second highest number of cases at 15.1 million, and is fourth globally by deaths at 178,769. Brazil is third by cases at 13.9 million and second with a death toll of 373,335 Mexico is third by deaths at 212,339 and 14th highest by cases at 2.3 million. 

Analysts said a weaker tone for the U.S. dollar helped offset pressure on crude. The ICE U.S. Dollar Index
DXY,
-0.47%
,
a measure of the currency against a basket of six major rivals, was down 0.5%.

A softer dollar can be a positive for commodities priced in dollars, making them cheaper to users of other currencies.

Among the petroleum products traded on Nymex, May gasoline
RBK21,
-0.47%

fell 0.4% to $2.03 a gallon and May heating oil
HOK21,
-0.71%

shed 0.5% to trade at $1.89 a gallon.

Natural-gas futures, however, added 1.3% to $2.71 per million British thermal units.

The National Oceanic and Atmospheric Administration’s weather outlooks show below-normal temperatures lingering across the eastern and central U.S. at least through May 2, which “continues to support heating demand expectations” for natural gas, said Christin Redmond, commodity analyst at Schneider Electric.

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