New York — Crude oil prices pulled back from overnight highs and moved lower in midmorning US trading Tuesday as a multi-week rally began to show signs of fraying amid a lack of fresh drivers.
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ICE April Brent was down 50 cents at $62.01/b and NYMEX March WTI was 83 cents lower at $53.73/b.
"The market tried to pick its head up again, but found little interest," Tradition Energy analyst Gene McGillian said. " I think the rebound we are seeing might be stalling."
Brent and WTI prices on Friday peaked at roughly 24% and 30% above their Christmas Eve lows, but have inched lower so far this week.
Prices need a fresh driver in order to continue their march higher, McGillian said, adding that this could come from more certainty surrounding US-China trade talks, increased confidence that OPEC and its allies are adhering to their agreed production cuts, or oil sanctions biting into supply levels.
The Brent forward curve moved deeper into contango Tuesday, with the prompt-to-sixth-month spread holding at around minus 5 cents/b. The front-to-sixth-month curve had been in backwardation.
Uncertainty surrounding US sanctions on Venezuela offered some support to markets Tuesday. Up to 7 million barrels of Venezuelan crude is sitting offshore in US Gulf Coast waters as buyers lack clarity on who and how to pay for it, according to Reuters reports on Tuesday. US sanctions require payments to state-owned PDVSA be made through special escrow accounts that will ensure the funds are routed to US-backed interim President Juan Guaido, but so far these accounts have not been set up.
"Buyers of Venezuelan crude are stymied and do not want to commit to paying for the crude oil until they know they are paying the right people," Price Futures Group Senior Market Analyst Phil Flynn said in a morning note. "This oil, lost in limbo, will create issues for US refiners that need more heavy oil to run refineries."
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Markets will look to US President Donald Trump's State of the Union address this evening for any signs of a policy shift regarding sanctions on Venezuela.
"We might see oil weaken a bit as markets wait and see if Trump makes a State of the Union announcement on any real plans for Venezuela," McGillian said.
NYMEX product futures were also lower Tuesday. March ULSD was down 95 points at $1.8979/gal while March RBOB was 23 points lower at $1.4300/gal.
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