By Jenny W. Hsu
Crude-oil futures lost steam in early Asia trade Thursday as investors cashed in their overnight profits, buoyed by a drawdown in U.S. crude stocks, but the markets remain upbeat as major oil producers are expected to reduce output starting this month.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $53.14 a barrel at 0253 GMT, down $0.12 in the Globex electronic session. March Brent crude on London's ICE Futures exchange fell $0.19 to $56.27 a barrel.
Oil prices surged overnight after the industry group American Petroleum Institute reported a 7.4 million-barrel drawdown in U.S. oil inventories in the week that ended Dec 30. If confirmed by the Energy Information Administration later today, the total stock will beat 482.7 million barrels. Analysts will also be watching the production figures to gauge the effect of rising oil prices on U.S. shale producers.
"Speculators have overbought in the past few sessions and they are now taking profits. This is why prices are down in absence of bad news," a Chinese fuel-oil trader based in Singapore said.
For more than two years, oil prices have been in a funk as supply has outstripped growth in demand. The low prices have emptied coffers in some countries, such as Venezuela. Even cash-rich producers such as Saudi Arabia had to tighten their purse strings to accommodate the low prices.
Prices for brent crude oil have slowly crept up by around $3.00 since late last year when members of the Organization of the Petroleum Exporting Countries and 11 others that are not members of the cartel agreed to slash their collective production starting this month. The proposed cut is equivalent to 1.8 million barrels a day, or roughly 2% of the world's daily oil production.
However, the pact--the first of its kind in eight years--has failed to quell skepticism that oil producers would make good on their promises given their past records of cheating. This time, the cartel has set up a monitoring committee to keep producers in check. The group is reportedly holding a two-day meeting on Jan. 21 and 22 to assess the compliance situation.
If the cuts are carried out, the global oil markets could slide into a deficit thanks to rising demand driven by China and India. However, some analysts are now unsure how thirsty China will be as prices climb.
"When prices were low, China bought aggressively to stock up their strategic petroleum reserve. But it remains to be seen if the momentum would slow down now prices are strong," said Jonanthan Chan, an energy analyst at Phillip Futures.
For the first 11 months of the year, China's crude import rose 14% year over year to 7.53 million barrels a day. Data for December and the whole year of 2016 will be released on Jan. 13.
Nymex reformulated gasoline blendstock for February--the benchmark gasoline contract--fell 117 points to $1.6342 a gallon, while February diesel traded at $1.6805, 125 points lower.
ICE gasoil for January changed hands at $491.00 a metric ton, up $0.50 from Wednesday's settlement.
Write to Jenny W. Hsu at firstname.lastname@example.org
(END) Dow Jones Newswires
January 04, 2017 22:46 ET (03:46 GMT)
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