IPE Brent falls as players look to reduce long positions

IPE Brent falls as players look to reduce long positions

London (Platts)--12May2006

IPE Brent futures in London fell Friday after the International Energy
Agency cut its estimate of 2006 oil demand growth and market players looked to
reduce their long positions ahead of the weekend, traders said.
At 1052 London time (0952 GMT) the front-month June IPE Brent futures
contract was trading 83 cents down on Thursday's close $72.61/barrel.
"Some traders have started selling out at the top end thinking there's no
reason to continue being long. That top end was reached yesterday afternoon,"
a London-based broker said, referring to the intra-day high on Thursday just
12 cents shy of $74.00/barrel.
The $74.00/barrel mark was reiterated as being an important resistance
level. "If for some reason prices do go up later today, I think that it can't
really go beyond the $74 mark as players will, as yesterday, sell out their
longs because there's no reason for prices to be up there. If there was a
rally I'd be a seller of it," one trader said.
However, the trend seems to be that the market could see some further
downside action. Also, on a longer term note, there have been reports
suggesting that some funds expect the price of crude futures to halve by this
time next year.
Traders also noted that the cut in oil demand growth by the IEA may have
had a possible effect on the downturn in prices.
The IEA, in its latest monthly oil market report earlier Friday, said it
now expected world demand for oil to rise by 1.25 million b/d this year, down
from a previous projection of 1.47 million b/d.
In outright terms, the IEA expects demand to average 84.83 million b/d in
2006, up from 83.59 million b/d in 2005.
The downward revision to demand growth was mainly attributable to a
weaker picture of US demand than had previously been implied by preliminary
weekly data and high exports from the former Soviet Union, which have had the
effect of reducing apparent demand.

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