Friday, May 8, 2009

>Crude down on profit taking; upside from equities

Singapore - Crude oil futures lost ground Tuesday in Asia on profit taking after a four-day climb, but sentiment appeared supported as firmer regional equity markets reflected growing confidence in the global economy.

While analysts were skeptical if the oil market's strength can be sustained in the face of weak fundamentals, many expect prices could still trend higher with equities rising globally and on the dollar's relative weakness.

"Sentiment is certainly strong - the markets are focusing on the positives," said David Moore, a commodity strategist at Commonwealth Bank of Australia.

On the New York Mercantile Exchange, light sweet crude futures for delivery in June traded at USD53.92 a barrel at 0657 GMT, down 55 cents in the Globex electronic session.

Nymex heating oil for June fell 106 points to 142.39 cents a gallon, while June reformulated gasoline blendstock traded at 158.40 cents, 20 points lower.

Nymex crude settled Monday at a fresh 2009 high as U.S. share markets surged on signs of an economic recovery, after reports of increased construction spending and pending home sales.

"We remain of the opinion that any additional price gains anywhere across the complex will be heavily contingent upon bullish leadership from the financial or currency markets," Jim Ritterbusch, president at trading advisory firm Ritterbusch and Associates, said in a note to clients.

"For now, we are letting out some leash on the crude market by allowing for a further up-move toward the USD57 area. But we will be looking to use such an advance as an opportunity to reestablish a short holding."

Looking ahead, weekly U.S. government oil data may lend some direction, possibly presenting further evidence that supply-demand factors remain bearish.

The federal Energy Information Administration is expected to report a 2 million-barrel increase in the country's crude stockpiles in the week to May 1, according to the average prediction from seven analysts polled by Dow Jones Newswires.

Gasoline stockpiles may have built by 500,000 barrels and distillates, including heating oil and diesel, by 1 million barrels, the survey showed.

Before the EIA's Weekly Petroleum Status Report Wednesday, the American Petroleum Institute industry group will put out its own data at 2030 GMT Tuesday.

"Inventories are large and will ultimately pressure the market and serve as a cap on oil prices," Moore said.

At 0657 GMT, oil prices on London's ICE Futures exchange were mixed, with Brent crude for June down 46 cents at USD54.12 a barrel.

May gasoil changed hands at USD453 a metric ton, chalking up USD3.25 from Monday's settlement.

Crude lower on profit taking; equities eyed
London - Crude futures slightly lower on profit-taking, amid broadly unchanged equities in much of Europe and Asia. Equities, particularly in U.S., expected to continue dictating price moves, despite repeated poor demand expectations from forecasters such as IEA and EIA, and brimming U.S. oil stockpiles. "Oil price momentum suggests higher levels - fundamentals suggest lower levels," says Mark Pervan at ANZ. "Momentum has been the better bet recently - albeit backed by rising equity markets. But the equity gains need to be consolidated...If equity participants take profits then the focus will switch to supply - and that's not a pretty picture." ICE June Brent -68c at USD53.90/bbl, Nymex June light, sweet -75c at USD53.72/bbl.