Brent Eases But Holds Close to $70 Per Barrel

Oil prices slipped on Wednesday, under pressure from a rise in US crude and gasoline inventories although crude remained near three-year highs.

Brent futures eased 24 cents to $69.72 a barrel, after climbing above $70 this month for the first time since 2014. US West Texas Intermediate futures were unchanged at $64.47 a barrel, Reuters reported.

The American Petroleum Institute said on Tuesday crude inventories rose by 4.8 million barrels in the latest week, compared with expectations for a decline of 1.6 million barrels. Gasoline inventories also rose.

Official US government inventory data were due out later on Wednesday and will be watched to see if the numbers confirm a rise.

“The market has rallied by 50% and a lot of investors have been involved for a long time,” Saxo Bank senior manager, Ole Hansen, said.

“At what level would we start to attract some nervousness on the downside?” he said. “We probably need to break below $60 on WTI to put the cat among the pigeons ... It’s going to take more than just a stock-build today to change that equation.”

Money managers hold more bullish positions in crude futures and options than at any time on record, which has been encouraged by falling global inventories on the back of supply cuts by OPEC, Russia and its allies.

But some traders are showing signs of seeking protection against a fall in crude prices. Trading data show open interest for Brent put options for a selling at $70, $69 and $68 per barrel has climbed since the middle of last week.

Sukrit Vijayakar of energy consultancy Trifecta said the rising options to sell were a result of huge amounts of long positions that have been built up in past months.

“We still have ... nine long barrels for every short barrel, so a reversal should be interesting to watch,” he said.

But traders said oil prices were unlikely to fall far as markets were supported by strong global economic growth pushing up oil demand and output restraint by the Organization of Petroleum Exporting Countries, Russia and others.

The deal to withhold output started in January last year and is currently set to last through 2018.