Crude-oil futures rose on Tuesday, but market participants said gains would be limited as oil prices remained volatile and supply-and-demand fundamentals in the market hadn’t changed.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February CLG5, +1.47% traded at $56.00 a barrel, up 74 cents in the Globex electronic session. February Brent LCOG5, +1.21% crude on London’s ICE Futures exchange rose 34 cents to $60.45 a barrel.
Oil prices have lost about 45% of their value since June. Markets have been fumbling around for a price floor, especially after the Organization of the Petroleum Exporting Countries refused to cut output to stem the decline in prices.
Morgan Stanley said it wouldn’t be surprising to see some value buying over the next two months as global oil demand would rise in the northern winter, while spending cuts by oil companies and falling numbers of drilling rigs in the U.S. may provide some comfort to investors.
“However, any oil relief rally is likely to be limited and short-lived, barring a major outage,” the bank warned, citing OPEC’s decision not to cut production, new oil supply coming in early 2015, and a strengthening U.S. dollar.
Analysts are still weighing how much further oil prices can slide.
Investment funds were quick to factor in the fall in oil prices, with a selloff exacerbated by the end of U.S. quantitative easing and subsequent strength in the U.S. dollar, ANZ Bank said in a report.
ANZ said speculative U.S. investors have liquidated over 50% of their net-long positions since June and their selling may be near completion.
But oversupply means that oil prices will remain under pressure. “Oil markets are one of our least-preferred commodities in 2015,” ANZ said.
Later Tuesday, the American Petroleum Institute will publish its weekly survey of U.S. oil inventories, followed by data from the U.S. Energy Information Administration on Wednesday. Any increase in U.S. oil supplies will be bearish for oil prices.
Nymex reformulated gasoline blendstock for January RBF5, +0.98% — the benchmark gasoline contract — rose 17 points to $1.5367 a gallon, while January diesel traded at $1.9522, 8 points higher.
ICE gasoil for January changed hands at $550.50 a metric ton, up $2.50 from Monday’s settlement.