Crude-oil futures dropped Thursday after a price gain of nearly 6% a day earlier lifted prices to their highest settlement level of the year.
Traders also digested details of the latest monthly oil report from the Organization of the Petroleum Exporting Countries, which included expectations for an increase in demand for the oil the group produces.
May crude CLK5, -1.65% fell 78 cents or 1.4%, to $55.61 a barrel on the New York Mercantile Exchange. On Wednesday, prices climbed 5.8% to settle at $56.39 — the highest settlement so far this year, after a U.S. government report showed a smaller-than-expected weekly rise in crude inventories.
June Brent crude LCOM5, -0.74% on London’s ICE Futures exchange was down 53 cents, or 0.8%, to $62.79 a barrel.
On a technical level, Nymex oil prices broke through $55 Wednesday “to complete a big technical base and today’s trading is a common retest of the breakout point and old resistance level as new support,” Colin Cieszynski, chief market strategist at CMC Markets, told MarketWatch in emailed comments. If that level continues to hold, that could be a “bullish sign confirming the breakout and signalling the start of a new recovery trend.”
Wednesday’s rally was “overdone,” Cieszynski said, especially considering that the International Energy Agency “raised its supply forecast almost as much as its demand forecast.” OPEC production growth is also likely to more than offset any declines in U.S. output, he said.
Meanwhile, OPEC said Thursday that demand for its own crude would rise slightly to roughly 29.3 million barrels a day in 2015. At the same time, demand for non-OPEC supplies would fall by about 165,000 barrels a day, it said. It also expects the boom in U.S. oil-supply to end this year.
At its last meeting in November, OPEC decided not to cut production even though oil prices had been pushed sharply lower, ultimately suffering a decline of close to 50% for 2014. Iran recently called on OPEC to cut production.
“Evidently, speculators are probably thinking that the worst days are behind us and may therefore expect to see an imminent drop in U.S. oil output after months of falling rig counts,” said Fawad Razaqzada, technical analyst at FOREX.com. But if sanctions on Iranian oil are lifted … we would be back to square one as Tehran would undoubtedly ramp up output and other OPEC members will likely maintain their existing production levels to defend their market share.”
On Nymex, May gasoline RBK5, -1.12% fell 3 cents, or 1.7%, to $1.90 a gallon and May heating oil HOK5, -0.16% traded at $1.878 a gallon, down 1.1 cents, or 0.6%.
Natural-gas futures extended earlier losses Thursday after the EIA reported that U.S. supplies for the fuel rose 63 billion cubic feet for the week ended April 10. That was more than the market expected.
May natural gas NGK15, -1.30% fell 5.4 cents, or 2.1%, to $2.556 per million British thermal units.