Oil Futures Sell Off Into Close

Oil Futures Sell Off Into Close

NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower Tuesday afternoon, retreating from fresh highs after running into short-term technical resistance ahead of weekly supply reports that are expected to show another build in U.S. crude oil stockpiles.

"The market hit a pause, which is partly due to technical but also because of weak Chinese trade data, and then Goldman Sachs' comment caused people to take profits," said Chicago-based analyst Phil Flynn, echoing other analysts.

"We got a good run last week but backed off today after running into resistance," said Tom Bentz, head of energy derivatives at ABN AMRO Clearing Chicago LLC. "Not much has changed in terms of fundamentals, except for psychology that prompted short-covering last week through yesterday. I consider this [retreat is] a correction."

NYMEX April West Texas Intermediate crude futures settled down $1.40 at $36.50 bbl, reversing off a three-month high on the spot continuation chart of $38.39. Retracement resistance is marked at $38.21 and again at $40.00 bbl.

May Brent crude futures on the IntercontinentalExchange fell $1.19 to $39.65 bbl, reversing off a fresh three-month spot high of $41.48 after testing retracement resistance at $41.26 bbl. The Brent premium over WTI rose 21cts to $3.15 bbl, the largest premium in about two weeks.

In products trade, NYMEX April ULSD futures slipped 2.25cts to $1.20 gallon, reversing off a three-month high on the spot continuation chart of $1.2425, with resistance marked at $1.2511. April RBOB futures also slipped, settling down 0.49cts at $1.3878 gallon, after having rallied early this morning to a better-than three-month spot high of $1.4160. Short-term resistance was marked at $1.4296.

Analysts said traders are focused on the American Petroleum Institute's data due out at 4:30 p.m. EST, and the Energy Information Administration's weekly report scheduled for release Wednesday.

These reports are expected to shed some light on short-term supply and demand fundamentals in the U.S. oil market. A survey by Schneider Electric shows analysts projecting a 2.75 million bbl crude stock build for the week-ended March 4, with gasoline stocks seen down 750,000 bbl and distillate supplies seen up 250,000 bbl.

EIA released its Short-Term Energy Outlook report for March early this afternoon that cut its estimates for global oil demand growth for both 2016 and 2017 from levels published in February.

The new STEO report slashes global demand outlook for 2016 by 174,000 bpd from estimates in February, projecting a 1.1 million bpd demand growth rate to 94.846 million bpd. EIA downwardly revised its estimate for world consumption in 2015 to 93.7 million bpd for a year-on-year growth rate of 1.3 million bpd.

The International Energy Agency will release its Monthly Oil Market Report on Friday (3/11).

Earlier, data from China that showed a slump in exports and a research note from Goldman Sachs cast doubt on the sustainability of the recent run-up in oil prices curbed enthusiasm for WTI futures. Goldman said a $40 bbl price for WTI is unsustainable, a comment that dampened investor enthusiasm.

George Orwel, 1.718.522.3969, george.orwel@dtn.com, www.schneider-electric.com. (c) 2016 Schneider Electric. All rights reserved.