Oil down 2% as OPEC output hike sparks profit-taking

03/05/2016 04:56 AST

Oil prices fell about 2 percent on Monday as production from the Organization of the Petroleum Exporting Countries was close to all time peaks and record speculative buying in global benchmark Brent sparked profit-taking on last month’s outsized rally.

OPEC’s crude production climbed in April to 32.64 million barrels per day, close to the highest level in recent history, a Reuters survey showed.

Iraq’s April exports from southern fields increased, as did seaborne exports from Russia, the biggest exporter outside OPEC.

Traders also cited a bearish stockpile rise of 821,969 barrels at the Cushing, Oklahoma delivery point for US West Texas Intermediate (WTI) crude futures during the week to April 29.

Brent crude rose 21.5 percent in April, its largest monthly gain in seven years. Speculator bets on higher Brent prices reached all-time peaks last week, while bullish bets on WTI futures and options rose to 10-month highs, feeding investor views prices may have risen too far, too fast. “While such huge speculative length in the crude benchmarks isn’t capable of independently reversing the strong up trend of recent months, it will certainly act to accentuate price declines,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Brent’s new front-month contract, July, was down 80 cents at $46.57 per barrel by 11:04 a.m. EDT (1504 GMT), after hitting a session low of $46.14. On Friday, the June contract for Brent expired as the front-month at $48.13, after setting a six-month high at $48.50. WTI was 50 cents lower at $45.42 a barrel, having slipped to $45 earlier.

Monday’s volume in Brent was notably lower with the market in London closed for the May Day holiday. The premium until Friday in Brent’s front-month versus second-month, known as “backwardation,” also ended, with a discount, or “contango,” now in its place.

“We would not be surprised to see the rally pause for breath soon and feel that the risks currently lie more to the downside,” London-based Capital Economics said in note.

Arab News