Tuesday, December 6, 2016

Oil Prices Pull Back As Investors Cash In On One-Year Highs

By Dan Strumpf
December 6, 2016

Oil futures retreated from one-year highs on Tuesday, as traders took profits following the sharp rally in the wake of last week’s decision by the Organization of the Petroleum Exporting Countries to cut production.

Light, sweet crude for January delivery CLF7, -0.75% fell 34 cents, or 0.7%, to $51.45 a barrel during the Globex session on the New York Mercantile Exchange. February Brent crude LCOG7, -0.60% lost 26 cents, or 0.5%, to $54.69 a barrel.

Crude futures had hit fresh one-year highs during the New York session. Oil prices have rallied sharply in the sessions before and after last week’s deal by OPEC to cut output. Analysts said the oil market looks increasingly likely to head higher, with occasional pullbacks as traders take money off the table.

“The market is buying into this rebalancing story, assisted by a cut from OPEC,” said Virendra Chauhan, an oil analyst at Energy Aspects. Oil prices rose almost 15% after last week’s OPEC deal, which would remove about 1% of supply from the market when it takes effect in January.

He added that oil futures expiring into next year have come closer into alignment with front-month prices, a typical sign of a market coming back into balance. “There have been substantial shifts [in trading] at least two to three years out” into the future, he said.

Separately, oil prices could see another move later this week on U.S. inventory data from the Department of Energy. The data is due Wednesday morning during New York trading hours, while similar data from the American Petroleum Institute is due later Tuesday during New York trading hours.

S&P Global Platts said it expects U.S. oil stockpiles fell 1.7 million barrels last week, though the pricing agency added that the OPEC agreement “could inadvertently lead to greater U.S. production down the road” as prices rise.

In refined product markets, Nymex reformulated gasoline blendstock for January RBF7, -0.45% — the benchmark gasoline contract — fell 52 points to $1.5523 a gallon, while January diesel traded at $1.6529, 42 points lower.

ICE gasoil for December changed hands at $474.75 a metric ton, down $2.25 from Monday’s settlement.

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