By Timothy Puko
Oil prices faded, undoing a small rally Friday as traders showed
skepticism that a surge of U.S. production is leveling off.
Oil has made gains for five weeks straight, but analysts are
warning the rally came on a false premise of sputtering production.
U.S. producers aren't shutting down rigs as quickly as they once
were and several countries around the world are trying to put more
of their crude onto the market.
"There's not necessarily a lot of belief in the front of the
market," said Ric Navy, senior vice president for energy futures at
brokerage R.J. O'Brien & Associates LLC. "We're still over
supplied."
Light, sweet crude for May delivery settled down 97 cents, or
1.7%, to $55.74 a barrel on the New York Mercantile Exchange. It
snapped a six-session winning streak, although prices are still
near the 2015-high set on Thursday. It finished the week up 7.9%,
and its percentage gains over a five-week span are unmatched since
2009.
Brent, the global benchmark, fell 53 cents, or 0.8%, to $63.45 a
barrel on ICE Futures Europe.
Oil's big gains from earlier in the week came from a series of
data that suggested slowing supply and growing demand would
rebalance a glutted market. Investors moved to their most bullish
position on Nymex oil since August in the week ended Tuesday,
according to the Commodity Futures Trading Commission
Money managers, including hedge funds and pension funds, added
2,893 new long positions--bets on rising prices--while cutting
16,291 bets on falling prices. Their net long position expanded 9%
in the week to 231,556, the highest level since Aug. 5.
Rig counts are still falling, but not quickly enough to add to
those beliefs on Friday. Prices barely moved after the Baker Hughes
weekly rig update, which showed a more modest decline than its
count from last week. There were 26 fewer rigs working in the U.S.,
which had a total count of 734.
There was very little clear direction in prices or sentiment,
analysts said. They pointed to several factors including chart
momentum, a stock selloff, the Greek debt crisis, war in the Middle
East and moves in the dollar as influential factors.
"There's just a whole mix of stuff that is going to lead to wide
price swings," said Jim Ritterbusch. U.S. oil prices could rise to
$60 a barrel next week, and "easily" fall back to $44, he
added.
Many analysts are warning not to get overly bullish because of
the oil market's resilience. Many countries around the world are
poised to increase supply, which could offset signs that
consumption is on the rise, Bank of America Merrill Lynch said.
"Global oil demand is a bit better than last year, but stocks
are still building and the recent run up in prices could lose steam
sooner rather than later," said Bank of America Merrill Lynch. The
bank sees crude WTI prices at end of the second quarter at $41, and
Brent at $48. Brent for June delivery is 1.2% lower at $63.21.
Matthew Cowley contributed to this article
Write to Timothy Puko at Timothy.Puko@wsj.com
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