OIL FUTURES: Crude Futures Up, But Fundamentals Remain Weak
May 17 2012 - 10:15AM
Dow Jones News
Oil futures rose with the market open Thursday, recovering
slightly from a decline the day before and at least temporarily
arresting a slide that has knocked more than 15% off of prices
since the start of March.
Light, sweet crude for June delivery was up 67 cents, or 0.7%,
at $93.28 a barrel on the New York Mercantile Exchange. Brent crude
on the ICE Futures Europe exchange was down 32 cents, or 0.3%, at
$109.43 a barrel.
The market was buoyed by initial jobless claims, which were
lower than expectations but flat with the week earlier, and by the
expiration Thursday of June-dated options, which was prompting some
trading in the underlying contract, which expires Tuesday. The
Traders also said they believed the market had become slightly
over-sold, with prices settling at a 6-month low on Wednesday.
Still, the same weak fundamentals that have plagued the market
for weeks remain present, with little change in sight, and traders
say they don't see any significant upside for oil prices in the
near future.
"I don't see the market warranting higher levels," said Tony
Rosado, a broker at GA Global Markets. "The real emphasis is, the
market is poor, the market looks like it still can work lower."
Crude prices fell 1.2% Wednesday to their fourth-consecutive low
for the year, after government data showed U.S. oil inventories at
a 22-year high, rising more than 10% in the last eight weeks on a
combination of weakening demand and growing supply. The
fundamentals in the market have been deteriorating for months, but
were masked for a time as prices spiked on geopolitical tensions
between Iran and the West over its fledgling nuclear program.
"This is a steep and damaging drop in oil prices that will have
implications for the foreseeable future," Dominick Chirichella of
the Energy Management Institute said in a note. "The uptrend that
was in place since late last year (mostly geopolitically driven)
has been broken and all technical signs point to a sustained
downward trend going forward."
Front-month June reformulated gasoline blendstock, or RBOB, was
about flat at $2.9216 a gallon. June heating oil was down 0.2% at
$2.8924 a gallon.
--By Christian Berthelsen, Dow Jones Newswires; 212-416-2381;
christian.berthelsen@dowjones.com