By Barani Krishnan
Investing.com - Oil prices ended up on Monday, but the market could have trouble extending its gains after an industry regulator for Texas declared “dead” a plan to cut output in the largest oil-producing state in the U.S.
Forecasts that the Energy Information Administration will report fairly largely weekly builds for crude, gasoline and distillates in its routine dataset due on Wednesday could also weigh on the more-than-60% recovery seen on the West Texas Intermediate crude benchmark over the past four sessions.
“We need some real hard bullish numbers to backstop these gains, and so far I haven’t seen those,” said Gene McGillian. vice president of research at Tradition Energy in Stamford, Conn.
New York-traded WTI settled up 61 cents, or 3%, at $20.39 per barrel, after hitting a three-week high of $21.41 earlier.
U.K.-traded Brent, the global benchmark for oil, finished up 76 cents, or nearly 3% higher, at $27.20. It hit $28 at the session high.
For the year though, WTI remains down 65%, while is Brent nearly 60% lower.
A Texas regulator who had proposed mandating a 20% production cut amounting to 1 million barrels in the state are now calling those efforts “dead” a day before the state was set to vote on the measure, Bloomberg reported.
Texas Railroad Commissioner Ryan Sitton predicted in an interview that curtailing production in a process known as “pro-rationing” would fail to get the support needed from the three-member agency when a vote on the matter is taken in Houston on Tuesday.
The Texas cuts plan was pushed aggressively by Sitton and two oil drilling companies in the state — Parsley Energy (NYSE:PE) and Pioneer Natural Resources (NYSE:PXD) — amid this year’s crash in crude prices forced by the coronavirus pandemic.
The plan was resisted by companies such as Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX) and Marathon Oil (NYSE:MRO), who argued Texas drillers were on track to cut capital expenditure on oil search and drilling by as much as 50% this year. The companies seemed to have the tacit backing of two other panel members of the Texas Railroad Commission, Chairman Wayne Christian and Christi Craddick.
As for the EIA’s weekly report due on Wednesday, a consensus of analysts tracked by Investing.com are forecasting a crude build of 10.6 million barrels for the week ended May 1, versus the previous week’s build of 9 million barrels.
Gasoline inventories are expected to have risen by 2.5 million barrels versus the previous week’s decline of 3.7 million. Distillate stockpiles are, meanwhile, expected to have risen by 3.6 million barrels, adding to the previous week’s 5-million-barrel build.