Oil closed at a three-month low, extending last week’s losses after Goldman Sachs Group Inc. cut its forecast for the third time in six months.
West Texas Intermediate fell 4.3%, more than erasing a rally fueled by Saudi Arabia’s decision less than two weeks ago to cut production by 1 million barrels a day. Even with Saudi Arabia’s cut, Goldman sees crude supplies rising and the bank cut its year-end price estimate to $86.
Prices:
- WTI for July delivery fell $3.05 to settle at $67.12 a barrel in New York.
- Brent for August settlement fell $2.95 to settle at $71.84 a barrel.
“Beyond the fact that a crude oil bull again cut its crude oil forecast, indicators in the physical market are also shaking the confidence of bulls who expect the market to move from a surplus to a deficit in the coming months” , said Rebecca Babin, senior energy trader at CIBC Private Equity. “Temporary spreads, which are the holy grail for traders gauging supply and demand dynamics, continue to deteriorate.”
The spread between second- and third-month US crude futures reversed to trade at a discount for the first time since March, signaling expectations of robust near-term supply.
There are some bullish signs, however. U.S. Gulf Coast sour crude prices are trading at the highest premium to WTI in a year after the nation pledged to buy 3 million barrels to replenish strategic oil reserves.
Hedge funds drove bullish bets on Brent and West Texas Intermediate crude in the week ended June 6. The U.S. Federal Reserve is expected to hold off on an interest rate hike after a year of hikes, a move likely to boost energy demand. Summer demand also remains a central focus for traders as they try to gauge actual physical demand.
