OIL FUTURES: Crude Drifts Higher, As Talk Of Correction Grows
March 15 2012 - 9:55AM
Dow Jones News
Oil futures drifted higher in morning trading Thursday, as
market chatter grew about whether pricey crude is headed for a
correction.
There was little in the way of headlines to drive the market,
and oil prices remained in the narrow range where they have largely
been stuck for several sessions. Light, sweet crude for April
delivery rose 55 cents, or 0.5%, to $105.98 a barrel on the New
York Mercantile Exchange. Brent crude on the ICE Futures Europe
exchange was down 23 cents, or 0.2%, to $124.74 a barrel.
The rise in oil prices in recent months has been driven by fear
of a supply disruption resulting from tensions between Iran and the
West, and oil's relationship to supply-and-demand fundamentals has
weakened. As prices have risen, demand has dropped and supply has
grown, with U.S. crude stocks growing more than expected in the
latest government data and inventories at the key Cushing, Okla.,
delivery point rising 37% in the last two months. While some of
that is due to the anticipated re-opening of the Seaway pipeline
that will carry crude to the Gulf coast, analysts and brokers
increasingly say the market's fundamentals don't support the
price.
"Cushing inventories build sharply again and we expect further
downward pressure on (West Texas Intermediate) in the short term,"
Barclays said in a research memo, noting total U.S. oil demand is
down 727,000 barrels a day from last year and that the pace of
weakness has accelerated since December.
Meanwhile, analysts say the high price of Brent crude has
undercut demand internationally, at a time when Europe faces the
prospect of recession and China's growth rate shows signs of
slowing faster than previously expected. In another recent note,
Morgan Stanley said "fundamentals warrant a price correction,"
though the firm said prices could remain elevated as long as
tensions remain high with Iran.
Front-month April reformulated gasoline blendstock, or RBOB,
recently fell 1.61 cents to $3.3309 a gallon. April heating oil
fell 0.59 cent to $3.2559 a gallon.
-By Christian Berthelsen, Dow Jones Newswires; 212-416-2381;
christian.berthelsen@dowjones.com.