May 20, 2024
Oil price news: Oil drops in listless trading as spreads show physical weakness
Bloomberg News
,![Oil rigs on lake Maracaibo in Cabimas, Zulia state, Venezuela, on Friday, Nov. 17, 2023. A decision by the US on Oct. 18 to ease sanctions in exchange for greater political freedom in Venezuela, has opened the doors for dealmaking and increased production that will enable the Latin American country's crude to reach global markets. Photographer: Gaby Oraa/Bloomberg, Bloomberg Oil rigs on lake Maracaibo in Cabimas, Zulia state, Venezuela, on Friday, Nov. 17, 2023. A decision by the US on Oct. 18 to ease sanctions in exchange for greater political freedom in Venezuela, has opened the doors for dealmaking and increased production that will enable the Latin American country's crude to reach global markets. Photographer: Gaby Oraa/Bloomberg](/polopoly_fs/1.2062928.1713965027!/fileimage/httpImage/image.jpg_gen/derivatives/landscape_620/oil-rigs-on-lake-maracaibo-in-cabimas-zulia-state-venezuela-on-friday-nov-17-2023-a-decision-by-the-us-on-oct-18-to-ease-sanctions-in-exchange-for-greater-political-freedom-in-venezuela-has-opened-the-doors-for-dealmaking-and-increased-production-that-will-enable-the-latin-american-country-s-crude-to-reach-global-markets-photographer-gaby-oraa-bloomberg.jpg)
Oil fell, hovering near three-month lows, as key market measures flashed signs of weakness. Still, futures have remained rangebound as traders await the next catalyst.
Front-month futures of global benchmark Brent settled below $83 a barrel on Tuesday. Prices have traded in a narrow range of US$5 this month.
“The lack of major, multi-quarter themes leads us to believe that range-bound volatility is likely here to stay,” RBC Capital Markets LLC analysts including Helima Croft said in a note.
Brent’s prompt spread narrowed to as low as 10 cents a barrel — the smallest premium for front-month contracts since January — signaling that supply is running ahead of demand. Additionally, the Brent DFL — a measure of Dated Brent relative to Brent futures — has turned negative, a sign of weakness in the physical oil market.
Still, Brent futures are about 7 per cent higher this year, supported by OPEC+ cuts, although prices have eased since mid-April. Crude’s price volatility has fallen to the lowest in five years.
Traders are now turning their attention to the producer group’s meeting in early June, where a rollover of existing curbs is expected. Meanwhile, geopolitical tensions continue, with ongoing drone strikes on Russian oil refineries and another Houthi attack against a tanker in the Red Sea area over the weekend.
Meanwhile in the US, the Biden administration announced on Tuesday that it’s selling 1 million barrels of gasoline stockpiles from reserves, which caused gasoline futures to extend declines to session lows at about $2.49 a gallon.
While the sale is an attempt to lower gasoline prices during the summer driving season, analysts have said 1 million barrels is unlikely to make a significant difference in the East Coast region, which burned through more than 3 million barrels of gasoline a day last June.
Prices:
- WTI for June delivery, which expires on Tuesday, dropped 0.7 per cent to settle at $79.26 a barrel in New York.
- The more active July contract dipped 0.8 per cent to $78.66 a barrel.
- Brent for July settlement fell 1 per cent to $82.88 a barrel.