MW: Oil falls first day in nine after topping $80 a barrel
NEW YORK (MarketWatch) -- Oil prices fell Tuesday after hitting a fresh one-year high above $80 a barrel, as sentiment was dominated by worries over whether crude's recent surge is justified given the ongoing weakness in demand.
Oil has risen in the past eight sessions, gaining 14%. It rallied 9.4% last week, the biggest weekly gain in two months.
Tuesday's decline was "more a pause in the rally," said Zachary Oxman, managing director of TrendMax Futures. "Now that we've breached $80, I expect to see firm trading in the $80s before the end of the month."
In recent trading on the New York Mercantile Exchange, crude oil for November delivery fell 93 cents, or 1.2%, to $78.68 a barrel, after rising to an intraday high of $80.05 a barrel. The contract will expire at the end of trading on Tuesday.
The December contract lost 97 cents, or 1.2%, to $78.99 a barrel.
"Areas of weakness remain, but most of the groundwork for a sustainable move up has been laid," said Amrita Sen, an analyst at Barclays Capital. "We continue[d] to reiterate our view of $76 a barrel average for the fourth quarter."
The American Petroleum Institute is scheduled to release its petroleum inventory data at 4:30 p.m. Eastern on Tuesday. The Energy Information Administration will report its more closely watched data on Wednesday morning.
Analysts polled by Platts expect a build in commercial-crude stocks of 2.2 million barrels for the week ended Oct. 16. They also project a decline of 2.3 million barrels in gasoline stocks and a drop of 1.5 million barrels in distillate inventories.
"Fundamentals remain poor amid a glut of product stocks and low refining margins which could see refiners reduce utilization further, hence reducing demand for crude," said Nimit Khamar, analyst at Sucden Financial Research, in a note to clients.
Demand recovery is far from convincing, while spare capacity has increased significantly, he said.
"So, once fundamentals come into the limelight crude prices could be susceptible to a sharp correction as a rally not supported by fundamentals cannot be sustained indefinitely," Khamar said.
Also in energy trading, November gasoline futures dropped 1.54 cents, or 0.8%, to $1.9178 a gallon, and November heating oil fell 1.22 cents, or 0.6%, to $2.04 a gallon.
November natural gas rose 25.8 cents, or 5.3%, to $5.091 per million British thermal units.
The United States Oil Fund (USO 40.18, -0.58, -1.42%) lost 0.8%, and the Untied States Natural Gas Fund (UNG 11.99, +0.36, +3.11%) gained 3%.
