MW: Oil prices take a breather after hitting nearly 3-week high
Oil futures pulled back on Friday, following a sharp rally in the New York session fueled by rising expectations of a production cut by big oil-producing countries.
Light, sweet crude for March delivery CLH7, -0.76% slid 43 cents, or 0.8%, to $53.35 a barrel, while Brent LCOH7, -1.08% for the same month lost 61 cents, 1.1% to $55.63 a barrel.
Crude prices have been see-sawing between gains and losses in recent weeks, but pushed higher Thursday, closing at their highest finish in nearly three weeks. Traders attributed the rally to technical buying, as well as mounting expectations that the Organization of the Petroleum Exporting Countries and its allies will follow through on their commitment to cut production.
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Oil market action has been driven in large part by OPEC and its recent decision with its allies to cut a collective 2% of global crude supply, a move aimed at balancing the market following more than two years of low prices and excess inventories. Traders have been encouraged by promising signs of compliance with the November pact.
Meantime, demand for oil imports in China remains resilient, and the U.S. is again ramping up production and rebuilding stubbornly high inventories. U.S. commercial crude inventories grew by 2.8 million-barrel in the week ended Jan. 20, the U.S. Energy Information Administration said Wednesday, exceeding a forecast by traders and analysts surveyed by The Wall Street Journal.
â€śThe oil market is currently characterized by rather selective perception: bearish news such as the rising U.S. crude oil and product stocks is being ignored, as is the increase in U.S. oil production,2 analysts at Commerzbank said in a note.
â€śInstead, even the most insignificant report of tightening supply â€” like yesterdayâ€™s news from the Buzzard oil field â€” is being seen as an opportunity to buy. Given that speculative net long positions in Brent and WTI are already at a record-high level, the correction potential is therefore growing all the time,â€ť they added.
In refined fuel markets, Nymex reformulated gasoline blendstock for February RBG7, -0.62% â€” the benchmark gasoline contract â€” fell 1 cent to $1.56 a gallon, while ICE gasoil for February changed hands at $487 a metric ton, down $7 from Thursdayâ€™s settlement.