Bulls take the edge for crude oil prices in early Tuesday trading on emerging signs of a balancing act under way in the market. File photo by Monika Graff/UPI. |
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March 28 (UPI) -- A wider spread between crude oil benchmarks and signs of trouble in Libya gave oil prices a bounce early Tuesday on signs of short-term tightening of supplies.
Crude oil prices moved in volatile territory in Monday trading as traders were left guessing following a weekend meeting from ministers monitoring an OPEC-led effort to offset an oversupplied market through managed declines. Ministers in Kuwait decided to stand pat and reconsider a six-month extension to the deal in April.
Markets may be bullish in anticipation of orders from the Trump administration that would erase sweeping regulations on fossil fuels. A pro-oil former businessman, the new U.S. president has made efforts to support the domestic energy sector through a wide range of executive orders.
Late in the trading day, the American Petroleum Institute will publish data on U.S. crude oil inventory levels for last week. S&P Global Platts said it expected a build of 300,000 barrels, which would be far lower than the four-year average if confirmed. Geoffrey Craig, the oil futures editor at Platts, said it's not so much the inventory levels, but the growing difference between the price for the global and U.S. benchmark prices that matters.
A premium for Brent "will likely boost U.S. crude oil exports and lower imports, which together could help to offset rising U.S. production and, ultimately, work to tighten U.S. supply," he said in a newsletter emailed to UPI.
The March contract for Brent expires later today. The price for the global benchmark was 1.12 percent higher than Monday's close to reach $51.32 per barrel about a half hour before the start of trading in New York. West Texas Intermediate, the U.S. benchmark, was up 1.1 percent to $48.26 per barrel.
Ole Hansen, the head of commodity strategy at SaxoBank, told UPI the morning momentum was on tighter supplies, with trouble resurfacing in Libya.
"Fundamental support has come from Libya where trouble have close down supply from two sites producing 250,000 barrels of oil per day," he said.
The oil futures editor at Platts said it will remain a tight balancing act for the market, however, as traders watch for the pursuit of a Goldilocks number that would keep producers from reacting too strongly in either direction.
"One question is whether the recent downturn in crude prices below $50 per barrel (WTI) will deter U.S. producers from going full-tilt," he said.
