By Georgi Kantchev And Nicole Friedman
NEW YORK--Oil prices Tuesday fell as a Saudi-led coalition
announced the end of its nearly monthlong military operation in
Yemen, lowering concerns violence in the Middle East could affect
oil production.
Though Yemen has little oil production, the military campaign
had sparked fears that the violence could spread to other
oil-exporting countries in the region and interrupt output
there.
"I don't think anybody expected the military operation to end so
quickly, " said Phil Flynn, analyst at the Price Futures Group in
Chicago. In the oil market, "it definitely accelerated the
selling."
Light, sweet crude for May delivery settled down $1.12, or 2%,
to $55.26 a barrel on the New York Mercantile Exchange, a one-week
low. The May contract expired at settlement Tuesday. The
more-actively traded June contract fell $1.27, or 2.2%, to $56.61 a
barrel.
Brent, the global benchmark, settled down $1.37, or 2.2%, to
$62.08 a barrel on ICE Futures Europe.
Market participants are also waiting for the latest U.S. supply
data, due Wednesday. U.S. crude-oil supplies are at their highest
level in more than 80 years.
Analysts surveyed by The Wall Street Journal expect the report
to show that oil stockpiles rose by 2.8 million barrels last week,
while gasoline supplies fell by 800,000 barrels and stocks of
distillates, including diesel fuel and heating oil, are expected to
rise by 1.1 million barrels.
The American Petroleum Institute, an industry group, will
release its own U.S. inventory data later Tuesday.
The U.S. Energy Information Administration has reported a drop
in weekly production in two of the past three reports, and many
market watchers are also waiting to see if the trend will
continue.
"The weekly numbers on production are an estimated output of a
model, rather than being observed data," and therefore are
unreliable, said Citigroup in a note. "The risk to the market is
now that the rally has come too soon for supply to get meaningfully
curtailed," which could set prices up to drop again in the second
half of the year, the bank said.
U.S. oil prices have risen close to 30% since a low in March on
expectations the oversupplied market will come into balance later
in the year. But analysts have warned that though U.S. oil
production could stop growing or even fall in the coming months,
other major producers are still pumping at a fast pace,
exacerbating the global glut.
"While the shift in sentiment isn't necessarily flawed, the
swing to the extreme is overdone," said analysts at London-based
consultancy Energy Aspects.
Gasoline futures settled down 4.34 cents, or 2.2%, at $1.8881 a
gallon. Diesel futures slipped 2.39 cents, or 1.3%, to $1.8532 a
gallon.
Write to Georgi Kantchev at georgi.kantchev@wsj.com and Nicole
Friedman at nicole.friedman@wsj.com
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