Oil Edges Higher, Takes Cue From Stocks
By Sarah McFarlane and Alison Sider
Oil prices edged higher Tuesday, supported by moves in stock markets and currencies, even as investors continued to anticipate a massive increase in U.S. crude output.
U.S. crude futures settled up 3 cents, or 0.05%, to $62.60 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 25 cents, or 0.38%, to $65.79 a barrel on ICE Futures Europe.
World stocks have been particularly volatile since a rout in early February, with oil broadly tracking their moves.
"Oil and equities were trading very much hand in hand and basically equity markets were calling the shots in terms of direction and trading patterns," said Bjarne Schieldrop, chief commodities analyst at SEB Markets.
Mr. Schieldrop said he expects in the short term this trend will continue and that the selloff in equities isn't yet over.
Oil was also supported by a slightly weaker dollar on Tuesday. As oil is priced in dollars, it becomes more affordable for holders of other currencies when the dollar weakens.
The Wall Street Journal Dollar Index, which tracks the U.S. currency against a basket of others, was down 0.36% Tuesday.
"Equities, and to some extent U.S. dollar trends, are likely to determine direction of oil pricing through the balance of this week," Jim Ritterbusch, president of Ritterbusch & Associates, wrote in a research note.
On a fundamental basis, the oil market continued to be caught between rising U.S. output, and efforts by the Organization of the Petroleum Exporting Countries and other major producers including Russia to cut output. The U.S. Energy Information Administration estimated Tuesday that U.S. output averaged 10.3 million barrels a day in February. The agency now expects production to average 10.7 million barrels a day this year -- a slight increase from its previous forecast and a new record. And the International Energy said this week that it expects the U.S. to become the biggest global oil producer by 2023, overtaking Russia.
"Despite the continued threat from U.S. shale growth, supply issues in Libya as well as a continuously fading surplus to the five-year average for U.S. crude stocks continue to offer support to the market," analysts at Schneider Electric wrote in a client note Tuesday.
Investors were monitoring news from the U.S. CERA Week conference in Houston, where OPEC Secretary-General Mohammad Barkindo said on Monday that the cooperation which led to an agreement between OPEC and other producers to cut oil production "is as solid as the Rock of Gibraltar."
While Mr. Barkindo said it was too early to comment on whether the deal to cut output would be extended beyond the end of 2018, Nigerian oil minister Emmanuel Ibe Kachikwu said the agreement was likely to be renewed.
"U.S. oil production is booming, the rig count is increasing, but on the other side of that it's very clear that OPEC and the 10 cooperating countries are really delivering on their cuts," Mr. Schieldrop said.
Gasoline futures fell 0.09% to $1.9331 a gallon. Diesel futures rose 0.35% to $1.9033 a gallon.
On Wednesday morning, investors will watch for weekly government data on U.S. oil inventories. A Wall Street Journal survey of analysts expects, on average, that stockpiles rose 2.3 million barrels last week.
The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week showed a 5.7 million barrel increase in crude supplies, a 4.5 million barrel fall in gasoline stocks and a 1.5 million barrel increase in distillate inventories, according to a market participant.
Write to Sarah McFarlane at email@example.com and Alison Sider at firstname.lastname@example.org
(END) Dow Jones Newswires
March 06, 2018 17:05 ET (22:05 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.