West Texas Intermediate oil futures gave back some of the previous session’s strong gains on Tuesday, as market participants looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of demand in the world’s largest oil consumer.
On the New York Mercantile Exchange, crude oil for May delivery declined 57 cents, or 1.1%, to trade at $51.57 a barrel during European morning hours.
The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles rose by 2.9 million barrels in the week ended April 3.
Total U.S. crude oil inventories stood at 471.4 million barrels as of March 27, the most in at least 80 years.
A day earlier, New York-traded oil futures shot up $3.00, or 6.11%, to close at $52.14 amid speculation an ongoing collapse in rigs drilling for oil in the U.S. will result in lower production.
Nymex prices received a further boost after industry research group Genscape reported a surprise drop in supplies at Cushing, Oklahoma, a key storage hub and the delivery point for U.S. oil futures.
Despite Monday’s gains, Wall Street investment bank Goldman Sachs (NYSE:GS) said in a report Tuesday that prices will need to remain low in coming months to achieve a slowdown in U.S. output growth.
“We therefore reiterate our forecast for prices to remain low in 2015 with an only gradual recovery into year-end,” it said.
Elsewhere, on the ICE Futures Exchange in London, Brent oil for May delivery slumped 67 cents, or 1.15%, to trade at $57.45 a barrel.
On Monday, London-traded Brent surged $3.17, or 5.77%, to settle at $58.12 as investors assessed the impact of last week’s Iranian nuclear deal on global supplies.
Market experts largely estimated that a ramp-up in Iranian crude exports could take several months after Western powers negotiated a tentative nuclear deal with Tehran last week.
Brent prices found further support after Saudi Arabia raised prices for crude sales to Asia, signaling better demand in the region.
Meanwhile, the spread between the Brent and the WTI crude contracts stood at $5.88 a barrel, compared to $5.98 by close of trade on Monday.
U.S. oil futures give back 1% after rallying 6% on Monday
