By Barani Krishnan
Investing.com - It’s back to the weekly grind for oil as the EIA’s upcoming dataset keeps the market on tenterhooks amid speculation about the kind of production cuts OPEC will announce at its meeting later this month.
U.S. West Texas Intermediate crude settled just one penny higher at $53.27 per barrel after spending the day both in the black and red. On Monday, WTI fell 1.3%.
Brent, the U.K.-traded global benchmark for oil, slid 15 cents, or 0.2%, to $62.14 a barrel by 2:38 PM ET (18:38 GMT). Brent lost 1.6% in the previous session.
A lack of commitment by Russia on how much output it will trim in the second half under its production shedding pact with OPEC has blown up expectations of a sharp rally anticipated this week, despite President Donald Trump's decision not to impose tariffs on Mexico.
The president initially proposed escalating duties of 5% to 25% on all imports from Mexico unless that country does enough to stop the flow of illicit drugs and undocumented migrants from its side of the border to the U.S. The Mexican situation, coming on top of the already festering U.S.-China trade war, hit oil hard as fears of a global recession intensified.
With the EIA’s weekly report on supply-demand due in less than 24 hours, trader attention turned toward what stockpile levels of crude, gasoline and distillates could be for this week.
Analysts believe the EIA will announce a crude stockpile draw of nearly 500,000 barrels for the week ended July 7 versus the shocking, unseasonal build of almost 7 million barrels in the previous week.
For gasoline inventories, the bet is the EIA will cite a smaller rise of 1 million barrels versus the previous surge of 3.2 million. U.S. distillate stockpiles likely rose by 1.2 million barrels against the last build of nearly 4.6 million.
The American Petroleum Institute will issue a snapshot at 4:30PM ET (20:30 GMT) on what the EIA’s numbers for the week ending June 7 are likely to be.
Total supply of U.S. oil and petroleum products have grown in the run-up to this year's summer driving season, bucking the typical trend of high fuel demand from peak driving activity.
Surging U.S. production, estimated at a record high of 12.4 million barrels per day last week, has also weighed heavily on market sentiment.
Hedge fund managers are liquidating bullish oil positions at the fastest rate since the fourth quarter of 2018 amid increasing fears about the health of the global economy, Reuters oil analyst John Kemp said in commentary Tuesday.
Production cuts of at least 1.2 million barrels per month since December by OPEC +10 – which includes Russia – boosted oil prices by more than 40% within the first four months of this year. That was before the recent selloff triggered by the Mexican tariffs talk, surging U.S. crude production and stockpiles and the worsening U.S.-China trade war.
Hedge funds and other money managers, also known as Commodity Trading Advisors (CTAs), were net sellers of 104 million barrels of futures and options linked to the six most important petroleum contracts in the week to June 4, Kemp said.
Fund managers have sold a total of 290 million barrels of petroleum in the last six weeks after buying 609 million in the previous 15 weeks since Jan. 8.
“We are in a $50-$65 range in WTI and a $60-$75 range in Brent, which suggests that the market is on the cheap end of its range,” Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, N.C., told Investing.com, using the widest fluctuations expected in both benchmarks.
“There is a large CTA short position in the market now,” Shelton said.