Oil slumps on new worries about supply
NEW YORK - Oil prices fell about 3 percent on Tuesday, retreating after six days of gains for benchmark Brent crude, as Goldman Sachs suggested the rally was unsustainable and analysts expected data likely to show another record high in U.S. stoc...
NEW YORK - Oil prices fell about 3 percent on Tuesday, retreating after six days of gains for benchmark Brent crude, as Goldman Sachs suggested the rally was unsustainable and analysts expected data likely to show another record high in U.S. stockpiles.
Differing views on a plan to limit oil output also put the market on the defensive. Kuwait, producing 3 million barrels per day (bpd), said it will freeze output only if all major producers participate, including Iran, which has balked at the plan.
"The comments out of Kuwait have encouraged the sell-off and it appears likely that a focus on weekly oil inventories will encourage prices lower," said Matt Smith, director of commodity research at New York-based Clipper Data.
Brent <LOCc1> was down $1, or 2.5 percent, at $39.84 a barrel by 12:42 p.m. EST (1742 GMT). During the session it hit a 2016 high of $41.48, which was up more than 50 percent from a 12-year lows of $27.10 struck less than two months ago.
U.S. crude slipped $1.23, or 3.3 percent, to $36.67 a barrel, rallying earlier to a three-month high of $38.39.
Goldman Sachs said rising oil prices "simply are not sustainable in the current environment".
The energy market "needs lower prices" to keep U.S. shale producers from ramping up output, Goldman said in a report. Otherwise, "an oil price rally will prove self-defeating, as it did last spring."
A Reuters poll of oil analysts forecast that U.S. crude stocks likely rose 3.6 million barrels last week, pushing total inventories to a record high for a fourth week [EIA/S].
The American Petroleum Institute will release more preliminary stockpiles data at 4:30 p.m. EST (2130 GMT), before official numbers on Wednesday from the U.S. government's Energy Information Administration (EIA).
A global supply glut in oil has brought prices down from highs above $100 in mid-2014.
North Sea crude supply should hit a four-year peak in April, holding above 2 million bpd for an eighth consecutive month, monthly loading programmes show.
In a development that could support a further rally, the EIA said it expected U.S. production for this year to drop 760,000 bpd versus 740,000 bpd previously. It also cut its 2016 demand growth forecast by 80,000 bpd versus 110,000 barrels previously.
While China's crude imports jumped 19 percent between January and February to 31.80 million metric tons, Brent's rally to $40 could slow oil purchases in the second quarter, trade sources said. China's economic health also remained in question, with total exports falling 25 percent in February.