Monday, February 29, 2016

WTI heads for longest run of monthly losses in a year

 U.S. crude futures slipped, heading for their longest run of monthly losses in a year as a further pullback in drilling failed to allay speculation that markets will remain oversupplied.

West Texas Intermediate futures dropped 1% and are down 3.5% in February for a fourth monthly decline. While the number of active U.S. oil rigs fell to the lowest since December 2009, the nation’s stockpiles have risen to the highest in more than eight decades.

WTI is down 12% this year on speculation a worldwide surplus will be prolonged amid increased exports from Iran. A proposal to freeze output by Saudi Arabia and Russia is achievable and prices may rise to as high as $50/bbl by the end of the year, Nigerian Minister of State for Petroleum Resources Emmanuel Ibe Kachikwu told CNBC. “Fundamentals remain weak,” Miswin Mahesh, an analyst at Barclays Plc in London, said in a report. There will be a “slow grind lower in prices over the first quarter,” increasing pressure on the highest-cost producers to curtail output.

WTI for April delivery traded at $32.44/bbl, down 34 cents, on the New York Mercantile Exchange as of 9:50 a.m. London time. The contract lost 29 cents to close at $32.78 on Friday. Prices rose 11% last week, the most since August.

Bullish Bets

Brent for April settlement slid 16 cents to $34.94/bbl on the London-based ICE Futures Europe exchange. The contract dropped 19 cents to close at $35.10 on Friday. Brent’s premium to WTI reached $2.75, close to the 11-week high of $2.86 hit on Feb. 26. The more-active May contract was down 22 cents at $35.22.

Hedge funds and other speculators increased net-long positions in WTI futures and options to the highest level since November, U.S. Commodity Futures Trading Commission data show. Speculators’ net-long position in WTI rose by 13,385 contracts to 110,554 in the week ended Feb. 23, according to the data. Shorts, or bets that prices will decline, slipped 6.7% while longs climbed 0.2%.


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