Crude Rally Falters, Down 2.5%
BRIAN BASKIN / Dow Jones Commodities News via Comtex 28may2008
Crude oil up
Percentage change over the past 52 weeks in the settlement price on the front-month contracts.
source: Thomson Reuters Datastream
Crude-oil futures settled at an eight-day low Tuesday, as the lack of new supply threats made it difficult for traders to maintain near-record high prices.
Light, sweet crude for July delivery settled $3.34, or 2.5%, lower at $128.85 a barrel on the New York Mercantile Exchange.
Futures settled 4.6% off the all-time intraday high of $135.09 set Thursday, even though the perception of tightening world oil supplies that led to that record remains intact. Tuesday was the first U.S. trading session following an attack by Nigerian militants Monday on a Royal Dutch Shell PLC pipeline.
Traders were also still processing a Friday report by Mexico's state-controlled oil company that the country's production in the first four months of 2008 was down 9% from a year earlier. But at $130 a barrel, the market may need a constant stream of fresh supply shocks to keep moving higher, said Peter Beutel of trading advisory firm Cameron Hanover.
"I'm starting to think that maybe this market has discounted all of the bullish factors ," Mr. Beutel said. "The market is going to need something fresh and fairly substantial in order for people...to be adding to prices."
The release of weekly U.S. oil and product inventory data Thursday, could provide the next spark, especially if the statistics show across-the-board drops, wrote analysts with Société Générale.
Oil products proved resistant to the forces dragging crude futures down Tuesday, with both heating oil and reformulated-gasoline blendstock, or RBOB, seeing a smaller percentage drop. Front-month June reformulated gasoline blendstock, or RBOB, settled 1.30 cents, or 0.4%, lower at $3.3830 a gallon. June heating oil settled 6.64 cents, or 1.7% lower, at $3.7992 a gallon.
Heating oil has led oil and RBOB futures higher for the past few weeks on strong diesel demand from Europe and Asia. Although it wasn't as obvious Tuesday, heating oil was likely the reason why oil prices didn't fall even more than they did, said Kyle Cooper, director of research at IAF Advisors in Houston.
"Heating oil is still supporting the market, it's not down nearly as much as crude," Mr. Cooper said. "From this perspective, heating oil is still the leader."
In other commodity markets:
GOLD: The combination of weaker oil and a stronger dollar prompted liquidation pressure in gold futures, which had run up to one-month highs last week. June gold lost $17.90 to $907.90 an ounce on the Comex division of the Nymex, while most-active September fell $17.80 to $912.80.
WHEAT: Prices rose on concerns about the potential for another drought in Australia. Chicago Board of Trade July wheat rose 6.50 cents to $7.59 a bushel.