Oil Extend Losses Tuesday

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures extended their decline Tuesday morning on profit-taking after last week's rally to 38-month highs for West Texas Intermediate and Brent on the Intercontinental Exchange, coming under selling pressure on expectations for an increase in crude oil inventories in the United States.

An early survey of analysts show estimates for a 1.75 million bbl crude oil stock build for the week-ended Jan. 26, while gasoline and distillate fuel supplies are estimated to have declined by 500,000 bbl and 1.75 million bbl, respectively.

If the Energy Information Administration confirms the crude estimate in its weekly oil report set for release on Wednesday (1/31), it would be the first increase in 11 weeks. The American Petroleum Institute, a trade group, will release its weekly oil report at 4:30 PM ET.

The survey also shows expectations for a 3.0% decline in refinery runs to 87.9% for the week reviewed.

On Friday, oil services firm Baker Hughes reported an increase of 12 oil rigs to a 759 five-month, feeding expectations for continuing increase in domestic crude oil production.

On Jan. 24, EIA showed U.S. crude production increased during the week-ended Jan. 19 by 128,000 bpd to 9.878 million bpd, the highest in nearly five decades, up 917,000 bpd versus a year earlier and 1.4 million bpd above their five-year average.

Profit taking also follows recent data from the Commodity Futures Trading Commission showing noncommercial traders heavily weighted on the long-side of the market as of the close on Jan. 23, which could accelerate a selloff amid long liquidation.

Technically, "We've reached a level consistent with the top," said analyst Brian Larose at ICAP in Jersey City, N.J. "Technical indicators have deteriorated over the past 48 hours, but they've not broken any support levels yet."

NYMEX March WTI crude oil futures were 58cts lower at $64.64 bbl, continuing a retreat from last week's three-year spot high of $66.66, with the contract since trading at a better-than one-week low of $64.22 bbl.

NYMEX February ULSD futures fell 2.48cts to $2.08 gallon while the March contract was down 2.33cts at $2.0745 gallon. February RBOB futures were down 2.38cts to $1.9111 gallon while March contract was down 2.34cts at $1.8926 gallon.

The February RBOB and ULSD contracts are set to expire at the close of trade on Wednesday alongside ICE March Brent futures.

ICE March Brent crude was down 38cts to $69.08 bbl in early trade, with April contract down 47cts at $68.73 bbl. Technical support for the April Brent contract is pegged at $68.50 bbl, said Larose.

"We are close to that [support level]," he added. "If we take out that level, we could have an extended selloff. If we hold there, the market would try to go higher after a brief pause."

George Orwel can be reached at george.orwel@dtn.com