Oil prices fell for a sixth-consecutive session on Monday after Opec signalled it may raise output again next month, and on signs that speculative positions were being unwound after hitting record highs.
Data from the Commodity Futures Trading Commission showed that funds holding speculative long contracts in crude had risen sharply, leaving the net long position at a record high of 88,712 contracts. However, this data covered the week up to Tuesday, April 5, after which crude prices fell by as much as 8 per cent as these positions began to unwind on bearish inventory data in the US.
“With the potential still for considerable liquidation of speculative long positions to come, the risk for oil prices is to the downside early this week,” said Kevin Norrish, energy strategist at Barclays Capital.
Further liquidation of these positions was seen after the Organisation of Petroleum Exporting Countries said it was considering a further 500,000 barrels-a-day increase in crude production in May.
Sheikh Ahmad al-Fahd al-Sabah, the Kuwaiti oil minister and president of the oil cartel, said yesterday that production was expected to rise to 28.5m barrels a day next month.
The cartel also hinted that $50 a barrel could be a realistic upper limit for its price band as this level of prices did not appear to be damaging to growth.
There was yesterday however, evidence that higher energy prices were hurting industry.
UK producer price inflation showed input prices – raw materials, energy and labour costs etc – rose 1.8 per cent month-on-month, leaving the annual growth rate in February and March at 11.4 per cent. This was the highest since records began in 1987, and more than half was attributed to oil-related products.
Most of this increase was being absorbed in company margins rather than being passed on to the consumer, with output prices showing a rise of only 0.6 per cent. “Intense competitive pressures in the manufacturing sector mean that the main impact will be a narrowing in margins rather than higher [retail] inflation,” said Paul Dales at Capital Economics.
Japan was expected to express its concern over higher oil costs at the G7 meeting in Washington next weekend. It is considered one of the most efficient users of oil, and may encourage other nations to do more to conserve energy.
By midday in New York, Nymex WTI crude for May delivery was down 62 cents at $52.70 a barrel.
The price of front-month Brent crude fell 87 cents to $52.02 a barrel.
Copper hit a record high on the London Metal Exchange, supported by gains on the Shanghai futures exchange and a drop in the dollar.
At the end of open outcry in London, three-month copper was up $27 to $3,314 a tonne, off its earlier high of $3,320.
Get alerts on Markets when a new story is published