Oil prices slide on profit-taking, but supply risks curb losses
Oil prices slipped in thin trading on Wednesday as investors took profit from the previous session’s rally, although supply disruptions in Brazil and Libya helped to limit the losses.
Brent futures for December delivery had fallen 13 cents to $50.41 at barrel by 0546 GMT, after ending the last session up $1.75, or 3.6 percent.
U.S. crude for December delivery dropped 13 cents to $47.77 a barrel, after closing up $1.76, or 3.8 percent. On Tuesday, it hit its highest since Oct. 13 at $48.36.
“(Investors are) taking short-term positions after a good rally,” said Michael McCarthy, chief market strategist at Sydney’s CMC Markets. He expected prices to slide further during the day, adding, though, that they would remain range-bound.
Activity in China’s services sector expanded at its fastest pace in three months in October, thanks to stronger new business, a private survey showed on Wednesday, easing some concerns over persistent weakness in the economy as the manufacturing sector falters.
It’s still not clear whether the service numbers would be a big enough boost to strengthen demand in the world’s top consumer of energy, metals and other commodities.
“A year-end recovery in commodity prices remains unlikely with a stronger dollar and continued weak Chinese economic data,” ANZ said in a research note on Wednesday.
The Caixin/Markit Purchasing Managers’ Index (PMI) rose to 52.0 in October from September’s 14-month low of 50.5, hitting the highest level since July 2015, although business expectations moderated to a record low in October.
A strike at Brazil’s state-run oil producer Petroleo Brasileiro SA (Petrobras) and the closure of the Libyan oil export terminal at Zueitina provided some support to prices, McCarthy said.
The Petrobras strike, which has slowed daily oil output by around 25 percent in the world’s ninth biggest oil producer, helped fuel the rally in prices in the previous session.
But a likely build in U.S. crude inventories last week weighed on sentiment.
Crude stocks rose by an estimated 2.8 million barrels in the week to Oct. 30 to 479.9 million, data from industry group the American Petroleum Institute showed on Tuesday. [API/S]
Government inventory data from the U.S. Department of Energy’s Energy Information Administration will be released later on Wednesday. [EIA/S]