West Texas Intermediate rebounded after its biggest daily decline in two weeks, while Brent was little changed. The North Sea crude may be capped at $140 a barrel this year, according to Bank of America Merrill Lynch.
Futures gained 0.1 percent after losing as much as 0.6 percent earlier today following a 1.5 percent drop on Feb. 15, the largest decrease since Feb. 4. Floor trading in New York was closed yesterday because of a holiday in the U.S. Brent will trade in a range of $100 to $130 a barrel through to 2015, according to Francisco Blanch, head of commodities research at Bank of America Merrill Lynch. A technical indicator signaled price declines may accelerate.
“We are kind of at an inflection point, with sentiment that has been strong up till now this year but now more wary of where to go,” Filip Petersson, Stockholm-based commodities strategist at SEB AB, said today in a telephone interview. “It’s not impossible that the positive sentiment will remain for a while unless there is something that could affect the market negatively.”
WTI for March delivery, which expires tomorrow, slid as much as 61 cents to $95.25 a barrel in electronic trading on the New York Mercantile Exchange, before paring losses and trading 13 cents higher at $95.99 at 2:04 p.m. London time. The more-active April contract gained 9 cents to $96.50. Yesterday’s transactions will be booked with today’s trades for settlement.
Brent for April settlement declined 11 cents to $117.27 a barrel on the London-based ICE Futures Europe exchange. Trading volume stood 23 percent below the 100-day average. The front-month European benchmark grade was at a premium of $20.82 to WTI futures. The gap expanded to $23.18 on Feb. 8, the widest since Nov. 26.
“The market is trying to decide whether we are just testing support or whether we are facing what many are saying is a long-overdue correction,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen. “We have been losing momentum in most of the other commodities sectors over the last two weeks. The agriculture sector has been losing momentum, we saw a sell-off in metals yesterday, so the question is whether the energy sector can remain an island of calm in this kind of environment.”
Energy supply is “slightly exceeding expectations,” John Browne, a partner at Riverstone Holdings LLC and former chief executive officer of BP Plc, said today at the International Petroleum Week conference in London. He said he sees “slightly” more downside for crude prices than upside because “demand is not growing very strongly.”
Money managers reduced bullish bets on Brent for the first time in a month, according to data from ICE Futures Europe. Speculative bets that prices will rise outnumbered short positions by 192,154 lots in the week ended Feb. 12, the exchange said yesterday. While that’s little changed from 192,195 a week earlier, the reduction of 41 lots is the first drop since Jan. 15.
“From a technical analysis point of view, we have a distinct potential double-top formation in West Texas, which is a classic bearish indicator,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “A break below $94.90 would be seen as a sign of weakness in WTI.”
WTI’s double-top was formed after futures halted advances near $98 a barrel on Jan. 31 and Feb. 13, creating two peaks with a trough in between at about $95, according to data compiled by Bloomberg. The lower price signals an area where buy orders may be clustered, and losses tend to accelerate with a breach of the double-top’s support level.
Platts, which publishes global oil price assessments, proposed changes to its benchmark North Sea crude pricing formula less than two weeks after Royal Dutch Shell Plc changed its own trading contract.
The price of the Ekofisk and Oseberg North Sea grades would be adjusted to account for their superior quality, Jorge Montepeque, global director of markets and pricing at the unit of McGraw-Hill Cos., said yesterday. The grades, together with Brent and Forties, comprise the Dated Brent marker used to price more than half the world’s oil.
A unification of the Platts and Shell initiatives is in the best interest of the market, according to JBC Energy GmbH.
“Two competing systems could split the liquidity of the BFOE market, which would not be in anybody’s favor,” the Vienna-based researcher said in a note today.