London — The oil complex pared gains in US mid-morning trading Tuesday, pulling back from four-year highs notched on Monday.
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ICE December Brent was lower by 22 cents at $84.76/b and NYMEX November WTI was down 24 cents at $75.06/b.
"The market might be catching its breath a little," Tradition Energy Analyst Gene McGillian said. "But I don't think we've seen a sign that the rally is over."
Monday's steep price gain left both Brent and WTI well into overbought territory. Technical analysis of price levels showed Brent settled Monday $1.13 above the upper Bollinger band and WTI settled 90 cents above the upper limit, according to data provider MarketView.
Early in the session Brent futures edged above $85/b, reaching as high as $85.33/b intra-day. But these levels proved to be unsustainable and the market pulled back to hover just below the $85/b mark.
"Keep in mind that we don't see any signs of demand growth slowing. The US economy still seems to be doing well and global demand growth is still projected at 1 million-1.5 million barrels next year," McGillian said. "Simmering in the background are worries about US-China trade, but the signing of the USMCA has pushed fears about trade further into the background."
On Sunday, the US and Canada came to terms on trade disputes that paved the way for a new North American free trade deal known as the US-Mexico-Canada Agreement. The three countries have been locked in negotiations for more than a year over modernizing NAFTA.
Expectations of stock build last week may also be putting the brakes on crude prices. US Commercial crude inventories are expected to have increased by 2.76 million barrels in the week that ended 28 September, according to analysts surveyed by Platts on Monday. The American Petroleum Institute is also set to release weekly US inventory data later Tuesday, with the market predicting a build.
Adding weight to the bearish sentiment is higher output by OPEC in September, which exceeded 32 million b/d, ING and PVM analysts said in their respective morning notes.
Products futures traced crude lower on Tuesday. NYMEX November ULSD was down 69 points at $2.4010/gal and NYMEX November RBOB was 76 points lower at $2.1199/gal.
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