IPE Brent drifts lower as US products stocks set to increase

London (Platts)--7Jun2006

Brent crude futures in London drifted lower ahead of the latest release
of the US stock data with expectations for builds in the key US gasoline and
distillate markets, trading sources said.
The front-month July IPE Brent futures contract edged lower in early
trading pegged at $70.55/barrel, down 26 cents from the overnight settlement.
Prices rebounded into the close Tuesday with the front-month contract gaining
around 50 cents/barrel in the last 30 minutes of trade to close at
$70.81/barrel.
Analysts polled by Platts predicted that gasoline stocks would rise by a
hefty 1.8 million barrels with distillates also posting gains of 1.6 million
barrels. Crude stock numbers were largely seen as insignificant due to the
very high inventory levels, but analysts projected them to fall 400,000
barrels.
"Gasoline stocks will likely show a significant increase due largely to
an expected post-holiday drop in implied demand of as much as 150-200,000 b/d.
A further expected improvement in output could be largely negated by a decline
in imports from recent near-record levels," energy consultant Jim Ritterbusch
said in a report.
Prices also came under pressure Tuesday following reports out of Iran
that there could be a positive resolution to the nuclear crisis. Iran gave a
cautious reception earlier Tuesday to the international proposal aimed at
resolving the crisis over its disputed nuclear drive, saying the offer
contains "positive steps" but also "ambiguities".
Physical oil markets remained in the doldrums with barrels struggling to
find homes, traders said. The Brent Exchange of Futures for Physical for July
was pegged at a 17 cents/barrel discount to the IPE contract. The EFP is often
seen as a proxy indicator for demand therefore the stronger the EFP, the more
demand there should be for physical oil.

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