LONDON—Crude oil futures were broadly steady as participants mulled the potential for prices to extend their recent rally.
"While it is evident that there is a lot of money being invested to attack the highs of the year, the follow-through buying is still hesitant," said Olivier Jakob, managing director of Switzerland-based consultancy Petromatrix.
The front-month April Brent contract on London's ICE futures exchange recently was down $0.16 at $80.32 a barrel. The front-month April contract on the New York Mercantile Exchange was trading $0.08 lower at $82.01 a barrel a day after settling at its highest level in two months.
The ICE's gasoil contract for April delivery was down $2.71 at $664 a metric ton after the expiry of the March contract earlier in the day at $668 a metric ton. '
Price action was choppy, reflecting participants' indecision over the sustainability of recent gains.
Fundamental factors also came back into focus after U.S. Department of Energy data Wednesday reflected large, unexpected declines in gasoline and distillate inventories of 2.9 million barrels and 2.2 million barrels, respectively.
The data were "positive...especially if the trend stays intact in the second quarter and we see persistent draws to swollen petrol stockpiles," according to Andrey Kryuchenkov, vice president of commodity research at VTB Capital in London.
Despite the latest stock drawdowns, Petromatrix's Mr. Jakob warned U.S. crude and clean petroleum product inventories are up 21 million barrels since the start of the year, 14 million barrels above year-ago levels and 68 million barrels above 2008. Ample supplies could restrict more upward movement for oil prices, he added.
Nevertheless, investor appetite for crude combined with technical momentum could still push prices to fresh highs for the year, said Edward Meir, an analyst at MF Global.
"While we think crude prices will test their 2010 highs, they are unlikely to substantially exceed [them]," he said. "Instead, a potential double-top at $83.95 a barrel [Nymex] should provide a technical sell signal that could bring prices back below the $80 a barrel mark," while the dollar's resilience could also limit the gains.
Nymex crude faces "formidable resistance" between $82.50 and $83.50 a barrel, said Dennis Gartman, publisher of the Gartman Letter. "The refiners still need better crack margins before they shall bid for crude aggressively," particularly as distillate cracks aren't rising in line with gasoline, he added.
