Wednesday, March 25, 2009

>Crude drifts dn; doubts over fundamentals linger

Singapore - Crude oil futures drifted lower Tuesday in Asia as traders mulled their next move after an overnight equity-led rally, amid lingering doubts if the market can sustain its upside without fresh support from supply-demand factors.

While Asian share markets held steady in the wake of the U.S. Treasury's plan to take troubled assets off the balance sheets of banks - a move aimed at shoring up the financial sector and possibly lead to a broad-based economic recovery - there may be little else to support oil prices in the near term, with global inventories staying bloated due to soft demand, traders said.

"I am not at all bullish," said Ryoma Furumi, a broker at Newedge Japan.

"It seems the dead cat is bouncing too high - we've heard that some monies are coming back into the market. (But only) the U.S. dollar and stocks are driving the market upward."

On the New York Mercantile Exchange, light, sweet crude for delivery in May traded at $53.61 a barrel at 0650 GMT, down 19 cents in the Globex electronic session.

Prices were largely range-bound, with the front-month contract locked in a narrow 42-cent band.

Nymex heating oil futures for April slipped 87 points to 146.20 cents a gallon, while April reformulated gasoline blendstock traded at 148.19 cents, 62 points lower.

Nymex crude Monday rallied 3.3% to a fresh 2009 high as orders poured in, mirroring a surge on Wall Street, where the Dow Jones Industrial Average chalked up nearly 500 points.

The dollar also continued to lose ground, boosting demand for dollar-denominated commodities such as oil, a development that some analysts said may be hard for the market's bears to ignore.

"We have emphasized that underlying fundamentals in the energy complex have not shown any improvement and probably won't for several months. But, any additional weakening in the dollar amidst longer-term inflationary concerns will spur significant speculative buying interest especially if accompanied by further gains in the stock market," Jim Ritterbusch, president at trading advisory firm Ritterbusch and Associates, said in a note to clients.

"Within such an environment, it is best to simply go with the flow in the process of pushing sizable supply surpluses and a continued weak demand environment to the backburner, at least temporarily."

Looking ahead, weekly U.S. government oil data due Wednesday may offer some directional cues.

The country's commercially held crude inventories are expected to have risen 1.4 million barrels in the week to March 20, with refinery run rates probably unchanged, according to the average prediction from 10 analysts polled by Dow Jones Newswires.

Gasoline stockpiles were likely to have slipped just 100,000 barrels and distillate stocks flat on-week, the survey showed.

Before the federal Energy Information Administration's report, the American Petroleum Institute industry group will release its own set of data at 4:30 p.m. EDT Tuesday, or 2030 GMT.

At 0650 GMT, oil prices on London's ICE Futures exchange also fell, with May Brent crude losing 32 cents to $53.15 a barrel.

Gasoil for April changed hands at $466 a metric ton, down $1.50 from Monday's settlement.

To see full report: COMMODITY CONTROL