Oil futures headed for a third straight decline on Tuesday, with U.S. benchmark crude trading below later-dated futures, as traders bet that domestic crude supplies climbed for a fourth week in a row, in the wake of last month’s Texas deep freeze.
Oil prices have fallen as “U.S. refiners struggle to bounce back from the Texas power crisis” in mid-February when the state was hit by a frigid temperatures, said Phil Flynn, senior market analyst at The Price Futures Group. “Expectations of another crude build is holding us back.”
The Energy Information Administration reported last week that U.S. crude inventories rose by 13.8 million barrels for the week ended March 5. That followed a hefty 21.6 million-barrel climb the week before as domestic refinery activity continued to recover from mid-February winter storms in Texas.
On average, analysts expect to see another crude supply increase, albeit a more modest one, of 400,000 barrels when the EIA reports its figures Wednesday for the week ended March 12, according to a survey conducted by S&P Global Platts. The American Petroleum Institute, a trade group, will report its own data late Tuesday.
West Texas Intermediate crude for April delivery
was down $1.37, or 2.1%, at $64.02 a barrel on the New York Mercantile Exchange. The May WTI contract
changed hands at $64.11 and has traded at a premium to the nearby month for three sessions, a condition known as contango, which can encourage investors to put oil into storage for later sale.
“A bearish contango structure for WTI is not surprising many given the strong build [in inventories] over the past couple of weeks,” said Edward Moya, senior market analyst at Oanda, in a note.
May Brent crude
the global benchmark, was down $1.12, or 1.6%, at $67.76 a barrel on ICE Futures Europe.
Crude futures shook off the rising inventories previously, aided by strong falls in gasoline and other products. But analysts said the size of the buildup, a persistently firmer tone for the U.S. dollar, a troubled vaccine rollout in Europe and jitters over the potential for COVID-19 variants to cause problems in the U.S., were sufficient to cool a crude rally that still sees both WTI and Brent up more than 30% year-to-date.
“The crude demand outlook still remains the key for higher prices and if short-term risks continue to grow due to virus variants, oil prices could be in for modest 10% pullback,” Moya said.
The S&P Global Platts survey of analysts also expect the EIA on Wednesday to report weekly supply declines of 1.4 million barrels for gasoline and 900,000 barrels for distillates.
April natural gas
traded at $2.52 per million British thermal units, up 1.4%.