Market Close: May 12 Up
May 12th, 2015 by loren
Oil futures settled above $60 a barrel on Tuesday — at their second-highest level of the year — buoyed by a weaker dollar as traders bet that upcoming data will show a decline in U.S. crude supplies. Prices also got a boost from a report that forecast further production declines in June among key U.S. shale plays and news of new air strikes in Yemen ahead of a planned cease-fire.
On the New York Mercantile Exchange, June crude rose $1.50, or 2.5%, to settle at $60.75 a barrel. That was the highest since May 6, which saw the highest settlement of the year. Brent crude for delivery in June added $1.95, or 3%, to $66.86 a barrel on London’s ICE Futures exchange.
Monday’s monthly drilling productivity report “ignited” the day’s rally, “highlighting signs of slowing U.S. production,” said Matt Smith, commodity analyst at Schneider Electric. “A weakening dollar in combination with the prospect of a bullish weekly inventory report” added further fuel to the bullish fire. The EIA forecasts that total oil output from seven major shale plays will decline by 86,000 barrels a day in June.Oil’s rally intensified in late-morning trading. It was likely a “geopolitical fear bid after renewed air strikes were reported in Yemen just hours before a new cease-fire was to be initiated,” said Tyler Richey, an analyst for the 7:00’s Report.
Meanwhile, analysts polled by Platts expect the EIA’s weekly inventory report due Wednesday to show a fall of 250,000 barrels in crude inventories. Inventory data from the American Petroleum Institute will come out later Tuesday.
In a report Tuesday, the Organization of the Petroleum Exporting Countries slightly raised its view on world oil demand growth for this year to 1.18 million barrels a day to reach 92.5 million barrels a day. That compares with total oil consumption of 91.32 million barrels a day in 2014. OPEC’s next meeting is set for June 5. In a monthly energy report Tuesday, the EIA raised its forecasts for average 2015 WTI and Brent crude prices, but cut its view on 2016 prices. The International Energy Agency will publish a monthly oil report Wednesday.
A weaker dollar also boosted dollar-denominated prices for oil. Tuesday’s moves helped extend Nymex oil’s year-to-date gain to about 14%.
Oil-market fundamentals, however, remain weak, Goldman Sachs said in a report. The bank estimates the global oil market will be oversupplied by 1.9 million barrels a day in the current quarter, the largest quarterly stock build this year. Goldman also said that WTI settling above $60 could lead to U.S. producers ramping up activity again.