Oil declined for a second day, dragged lower by weakness in refined products as traders await data expected to shed light on the extent of crude surpluses.
West Texas Intermediate dipped 1.1% to settle near $58 a barrel, pressured by routs in diesel, gasoline and other products. The difference between the price of US gasoline and crude oil, known as a crack spread, fell to the weakest since February, while a comparable gauge for diesel also slid.
Refined products had been one of few tailwinds for crude this year, and the recent demand-driven weakness is exacerbating a sense of bearish gloom ahead of a widely telegraphed glut.
Some trend-following commodity trading advisers were selling positions in the products, according to data from Bridgeton Research Group. Such market participants can intensify price momentum.
Traders are looking ahead to a slew of reports from the International Energy Agency and OPEC set to be published this week, as well as a Wednesday decision on monetary policy from the Federal Reserve. US crude output is expected to hit a record 13.61 million barrels a day this year, according to the Energy Information Administration’s Short-Term Energy Outlook released Tuesday, adding to short-term oversupply concerns.
The IEA has predicted a record oil surplus next year, and the volume of crude crossing oceans is rising. Fuel prices have softened in recent days, removing one factor that had supported crude during the past few weeks. Still, the US oil benchmark remains in the tight $4-a-barrel range it has traded in since the start of November.
“Eventually, the current huge blob of oil at sea will move onshore where the sensation of rising crude oil stocks will be more tangible,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “The only reason why Brent crude hasn’t fallen faster and deeper is because of the US sanctions related to Rosneft and Lukoil,” he said in reference to the blacklisting of the Russian oil giants.
Oil Prices
West Texas Intermediate for January delivery edged down 1.1% to settle at $58.25 a barrel in New York.
Brent for February settlement slipped 0.9% to settle at $61.94 a barrel.
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