FT: Markets: Oil slides ahead of US inventories data
Oil prices fell on Wednesday ahead of the latest US weekly inventories data, while gold remained range-bound and base metals prices retreated as commodity markets continued to look for impetus from the US dollar and equities.
Olivier Jakob, head of Swiss-based oil consultancy Petromatrix, said extremely high levels of inter-asset correlation meant that no market was trading entirely on its own fundamentals.
“The problem remains that when asset classes that are supposed to act somewhat independently trade [with] such a strong correlation, we come to a situation where no single market knows exactly what it is pricing,” said Mr Jakob.
Nymex December West Texas Intermediate lost 55 cents at $79.00 a barrel, while ICE December Brent retreated 52 cents to $77.40 a barrel.
Technical analysts said that $78 a barrel appeared to have held for the moment as a support level for WTI but a more negative tone to short-term pricing signals could prompt momentum traders to reduce their long-side exposure (bets on prices rising).
US crude stocks were seen rising 1.8m barrels last week, while petrol inventories were forecast to have fallen 800,00 barrels, according to a poll of analysts by Reuters.
Nymex November RBOB unleaded gasoline traded just over 2 cents lower at $2.0492 a gallon.
Distillate stocks (including heating oil) were expected to have fallen 1.1m barrels, with colder weather expected to have boosted demand in the US north-east region.
Nymex November heating oil dipped 1.7 cents to $2.0380 a gallon.
Almost a fifth of US refining capacity remains inactive but refinery utilisation was forecast to increase 0.2 percentage points to 81.3 per cent, following a spate of production problems at a number of US facilities.
Profit margins on gasoline for refiners have shown a clear improvement in recent weeks. The improvement could encourage higher refinery demand for crude.
Analysts will also be looking for any stronger indications that demand from US consumers is improving following an unexpected drop in US consumer confidence in October, according to the Conference Board’s measure, released on Tuesday.
On Tuesday, Melissa Kidd, of Lombard Street Research, warned that weak underlying demand in both crude and product markets had left the oil market potentially “exposed to a nasty correction”.
Although investors have continued to pour money into the oil market, Ms Kidd said: “Overall, the supply-demand balance in the US, the world’s largest consumer of crude oil, is pointing to weaker global prices.”
