IPE Brent drifts lower as fund-led rally runs out of steam
London (Platts)--31May2006
IPE Brent crude oil futures in London drifted lower Wednesday in light
volumes, reversing gains from Tuesday sparked off by a fund-led rally due to
bullish data coming out of China about oil demand.
The front-month July Brent futures contract dropped 81 cents to
$70.28/barrel at 0958GMT with brokers expecting the $70/barrel level to be
tested later in the day.
"Psychologically the market support is $70/barrel, but buyers keep
entering into the frame around this level," one broker at Man Financial said.
Chinese oil data appeared to suggest that apparent oil demand rose 8% in
April from year ago levels with refiners more likely to hike crude runs due to
a rise in domestic product prices. "This is undoubtedly a very bullish
factor," the broker said.
Preliminary data for April showed that product demand was 7.026 million
b/d, up from over 6.6 million b/d in January 2006.
Elsewhere, demand was solid with lots of buying interest as refiners,
which had been shut for maintenance in the US and Europe, began to restart
their plants.
Several traders have also been buying further down the oil curve to lock
in prices ahead of the hurricane season in the US Gulf which many forecasters
have said could be extremely heavy. "If we get a big US hurricane season or
further geopolitical events prices could rally," Any opportunity to buy below
$70/bbl is being seized upon," Man Financial added.
OPEC ministers meeting in Caracas, Venezuela appeared to be indicating a
rollover to production quota's and maintaining output at 28 million b/d.
Ministers ahve indicated that there is no need for the cartel to change its
output policy at a time when prices are running high and amid continuing
geopolitical concerns surrounding Iran.
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