Oil halts three-day rally as U.S. stockpile data is awaited for cues

Futures in New York slid as much as 0.4% after closing at a three-week high on Monday as an advance in equities revived optimism about economic growth and Libya’s crude exports from a key terminal were impeded. The focus now returns to U.S. stockpiles, which are  forecast to have risen last week. While they increased in three of the past four weeks, the pace of gains slowed, allaying fears that American supply will undermine OPEC’s output curbs.

After posting the best January in more than a decade, worry over  record U.S. output and broader market turmoil has dragged crude down this month. Still, Saudi Arabia’s oil minister over the weekend welcomed the rise in American production, adding that strong demand will help absorb it. He also pledged that the Organization of Petroleum Exporting Countries and its allies may ease supply curbs in 2019 without shocking the market.

“It’s a mixed market with both bearish and bullish signals,” said Hong Sung Ki, a commodity trader at NH Investment & Securities Co. in Seoul. “Investors are now keeping a close watch on the U.S. inventory number as growth has been rather slower than expectations. It’s a question whether this slowness would last.” 

West Texas Intermediate for April delivery was down 16 cents at $63.75/bbl on the New York Mercantile Exchange at 3:56 p.m. in Singapore. The contract rose 36 cents to settle at $63.91 on Monday, the highest close since Feb. 5. Futures are set for a 1.6% drop in February, the first monthly loss since August. Total volume traded was about 34% below the 100-day average.

Brent for April settlement, which expires Wednesday, lost 18 cents to $67.32/bbl on the London-based ICE Futures Europe exchange. The more-active May contract was down 19 cents at $67.10. The global benchmark crude traded at a $3.61 premium to WTI.

Stockpile forecast

U.S. inventories probably rose by 2 MMbbl last week, following a surprise drop in the previous week, according to a Bloomberg survey before Energy Information Administration data due Wednesday. Meanwhile, the number of rigs drilling for oil in the U.S. has risen by 52 this year, Baker Hughes data show.

“We’re not so much worried about inventories, but trying to see how U.S. domestic production and rig count numbers are coming to week by week,” David Lennox, a commodities analyst at Fat Prophets in Sydney, said by phone. “If those numbers change consistently to the upside, we would see the market react in the other direction.”