Oil prices edged up slightly on Tuesday after posting their largest one-day drop in nearly a year on Monday. Investors are concerned about rising Russian output and the blooming trade war between the US and China. Anadarko photo.
Oil prices fell over 3 per cent on Monday
Oil prices rose slightly on Tuesday, but not enough to recover losses in the previous session which saw prices fall over three per cent Monday, the largest drop since last June.
Rising Russian production and hints that Saudi Arabia will cut its selling prices pressured oil prices Tuesday.
As well, investors remained cautious about the trade war between the United States and China after China slapped higher tariffs on 128 US products on Monday in retaliation for the Trump tariffs on steel and aluminum imports from China. Should the trade dispute continue between the world’s two largest economies, many are concerned about the impact on the global economy.
By 12:40 p.m. EDT, benchmark Brent was up 43 cents to $68.07/barrel and US WTI rose 50 cents to $63.51/barrel. The Canadian Crude Index jumped 4.68 per cent, or $2.04, to $45.60.
Last week, Brent topped $71/barrel, but was unable to stay at that level.
“We had a test of the year’s (price) high and oil failed to break that, so from a trading perspective … with a possible trade war looming and negative sentiment building, and a possible rise in U.S. inventories later this week, this fits with a picture of profit-taking,” ABN Amro chief energy economist Hans van Cleef told Reuters.
Analysts expect US crude stocks to rise for a second week in a row. Data on US oil inventories will be released by the American Petroleum Institute later on Tuesday and the US Energy Information Administration will release its data on Wednesday morning.
Those analysts polled by Reuters on US crude stocks believe inventories will have increased by 1.7 million barrels in the week ending March 30.
According to Reuters, money managers have boosted bets on a sustained rise in Brent crude and have brought total long holdings of futures and options to the equivalent of over 615 million barrels.
“With excessive hedge fund positions still looming over the market, profit-taking should weigh on oil prices over the coming weeks,” Julius Baer head of commodities and macro research Norbert Ruecker told Reuters.
Pressure from the physical market is also mounting as Saudi Arabia is expected to drop its prices to all crude grades it sells to Asia next month. As well, Russia recently boosted its output and hit an 11-month high for production.
Prices for physical barrels of crude in the North Sea are now near their lowest since last June due to scheduled refinery maintenance.