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Crude-Oil Futures Struggle to Recover After Steep Selloff

02/22/2013 | 10:20am US/Eastern
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--Brent crude oil gains, U.S. benchmark crude oil remains weak

--High inventory, low refiner demand keep pressure on crude-oil prices

--RBOB gasoline recovers after sharp three-day decline

 
   By David Bird 
 

NEW YORK--Crude-oil futures prices, battered in a sharp two-day selloff spurred by demand worries, struggled to recover Friday, while gasoline futures prices rebounded.

April-delivery light, sweet crude-oil futures on the New York Mercantile Exchange were 10 cents lower at $92.74 a barrel after a modest attempt at a rally failed. Front-month Nymex oil futures dropped $4.58 a barrel over the two previous sessions after the Federal Reserve's policy-making board hinted at an early end to its bond-buying program and oil inventories rose sharply. The contract settled Thursday at a 2013 low of $92.84 a barrel.

April ICE Brent crude oil was 64 cents higher, at $114.17 a barrel, after falling $3.99 in the past two days, to a three-week low.

Analysts at Goldman Sachs said oil prices are now "in line with fundamentals" after moving too high as a result of "forward-looking survey data generating renewed optimism" on the global economy and oil-demand growth. The reality of "lackluster" hard data on actual demand and weak physical markets for oil brought about the selloff, Goldman said in a note.

Traders said fund managers and other speculative investors who had built sizeable positions in anticipation of rising oil prices aggressively sold contracts in recent days.

Pressure on U.S. crude-oil prices built when the Energy Information Administration reported domestic crude-oil stocks rose by 4.1 million barrels last week, more than twice the expected level.

Analyst Tim Evans at Citi Futures said the "bearish trifecta" of rising U.S. oil output, higher imports and reduced refiner demand for crude oil due to seasonal maintenance work sank crude-oil prices.

"The market certainly remains well supplied," he said.

Andy Lebow, senior vice president for energy futures at Jefferies Bache, said U.S. crude oil now appears set to trade in a range of $90 to $95 for the near term, down from the recent span of $95 to $100.

March-delivery reformulated gasoline futures prices, which lost 9.8 cents a gallon in the previous three days, rebounded modestly. Price volatility is common at this time of year as refiners walk a fine line between producing enough fuel to meet the winter-grade specification for the March contract before switching to the costlier, cleaner-burning summer-grade fuel that meets the April contract specifications.

March RBOB was 2.49 cents a gallon higher, at $3.0614 a gallon.

Traders said further broad swings in prices can be expected before the March contracts for RBOB gasoline and heating oil expire on Feb. 28.

March-delivery heating-oil futures, which shed 12.8 cents over the previous four sessions, were up 0.55 cent at $3.1012 a gallon.

Write to David Bird at david.bird@dowjones.com.

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