Oil futures dropped on Tuesday, pressured by expectations that this week’s data will show a further rise in U.S. crude inventories and concerns that an economic slowdown in China may dull the outlook for energy demand.
Natural-gas futures, meanwhile, suffered from a loss of more than 10%, weighed down as traders look forward to the end of the winter heating-demand season, with trading volatile ahead of options and futures contract expirations.
Crude futures for April deliveryCLJ4 -1.14% dropped $1.70, or 1.7%, to $101.12 a barrel on the New York Mercantile Exchange.
Oil fell “on concerns of slowing demand in China and forecasts that U.S. oil supplies grew last week,” said Addison Armstrong, senior director for market research at Tradition Energy in Stamford, Conn.
“China’s Industrial Bank has announced curbs on property loans until the end of March, triggering worries that a slowdown in property development will stanch demand for commodities,” he said.
Chinese shares fell sharply on Tuesday, due to worries about the country’s property market. China is the world’s second-largest oil user.
The concerns over China also weighed on prices for crude’s European benchmark oil. On the ICE Futures exchange, April Brent crude shed 52 cents, or 0.5%, to $110.12 a barrel.
Over in the U.S., traders looked to upcoming data on weekly petroleum supplies. The American Petroleum Institute will issue its report later Tuesday, while the Energy Information Administration releases its figures on Wednesday
Analysts surveyed by Platts forecast a climb of 1.5 million barrels in crude supplies. Analysts were also looking for gasoline supplies to decline 1.5 million barrels and distillate inventories to fall by 2 million barrels.
Higher demand for heating on the heels of the severe cold this winter has caused distillate-oil inventories to decrease markedly, said Fawad Razaqzada, technical analyst at FOREX.com, in a note. “However, the pace of the recent drawdowns in distillate stockpiles have slowed down somewhat, while crude-oil inventories have already started to build up once again.”
“As we head towards the spring season, demand for heating oil is likely to start dwindling,” he said. “At the same time, production of crude oil is likely to continue increasing” and it’s possible that the price of U.S. oil “may give up the entire gains it has made over the past couple of months.”
Natural-gas futures extended their losses to a second-straight session on Tuesday, with wintery weather still prominent in much of the U.S. but a start to the spring season in view next month.
March natural gas futures NGH14 -7.00% fell 58 cents, or nearly 11%, to $4.865 per million British thermal units. It lost 11% on Monday, but futures prices on a most-active contract basis are clinging to a gain of around 10% year to date.
Source: Marketwatch
