Brent Edges Down Towards $117; US Data, Italy Election Eyed

Brent Edges Down Towards $117; US Data, Italy Election Eyed

Brent crude edged lower towards $ 117 per barrel on Tuesday, adding to losses across the previous three sessions, with traders waiting for U.S. data to provide clues to growth in the world’s largest oil user, besides weekend elections in Italy.

Political uncertainty in Italy, the euro zone’s third-biggest economy, could add to the region’s woes, curbing investors’ appetite for riskier assets such as oil.

“We’ve just came off from the peak a little and the market is beginning to focus on the Italian elections,” said Ric Spooner, chief markets analyst at CMC Markets in Sydney, pointing to rising wariness among investors in risk markets.

“The caution might be a bit sharper in oil, as we had quite a bit of a run-up and the market is vulnerable to bad news at the moment.”

Brent crude for April delivery slipped 16 cents to $ 117.22 a barrel on Tuesday morning. U.S. crude for March fell 45 cents from Friday’s close to $ 95.41.

There was no settlement for U.S. crude futures on Monday due to a holiday in the United States.

Brent is nearly $ 2 off a 9-month high of $ 119.17 hit earlier in February on a price run-up spurred by economic recoveries in the world’s top two oil consumers, the United States and China, and higher demand forecasts from the U.S. Energy Information Administration and OPEC.

Trading will pick up later on Tuesday as U.S.-based traders return from their break and the release of U.S. oil inventories data has been delayed by a day to Wednesday and Thursday. Housing data from the United States later this week could also provide signs on its economic health.

Technical charts point to lower prices in the absence of fresh data that could sway the market.

(Read More: Oil May Extend Losses If Fed Minutes Hint at Policy Pause)

Brent oil is expected to fall into a range of $ 111.97 to $ 113.67 per barrel over the next four weeks, similar to a downtrend between March and June last year, Reuters markets analyst Wang Tao said.

A technical analysis of the U.S. crude price chart showed it was in a potential double top formation, a bearish signal, and could break below a support level of $ 94.90, Spooner said.

Even though a lot of money has been poured into the two oil contracts last month, they have failed to rise and stay above key resistance levels, Stephen Schork, president of the Schork Group in Villanova, Pennsylvania, said.

“Should the bullish month that has accumulated over the last four weeks tire, then it has no other place to go but to test resistance to the downside,” Schork said in a note.

Investors are also eyeing the next round of nuclear talks between major powers and Iran next week.

Sanctions on the OPEC producer have reduced its oil exports, which could have fallen below 1 million barrels per day (bpd) in January, according to estimates from the International Energy Agency (IEA).

(Read More: IEA Sees Iran Oil Sales Falling as Sanctions Bite)

“With a significant geopolitical risk premium currently priced in, we feel that some downside is warranted, unless there is a significant escalation in Middle East North Africa tensions,” Marc Ground, a commodities analyst at Standard Bank, said in a note.

Major world powers have offered to ease sanctions on Tehran’s trade in gold and precious metals in exchange for the closure of a uranium enrichment plant, but a spokesman for Iran’s foreign ministry turned down the offer on Monday.

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