New York--Jun 1--NYMEX crude and product futures are seen lower in
followthrough from Friday's weak close. Jly crude fell 24-cents in overnight
trade and could drop to test $16.00, an 8-week low, as participants take profits
amid renewed bearish sentiments in the market, brokers and traders said.
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NYMEX Jly crude ended the overnight Access session down 24c at $16.60. Jly
heating oil ended down 27 points at 39.36c, while Jly gasoline ended down 63c at
48.30c.
In the absence of fresh news, Jly crude is expected to test support around
$16.20-$16.30. If the contract fails to hold at this range, stop-loss orders to
sell could be triggered pushing Jly crude down to $16.00 and later at $15.70.
"A lot of this (weakness) is followthrough from Friday," one broker said.
"The market is setting up to try and test $16.00 and downwards."
The market is expected to be fairly low-volume, following a 3-day holiday
weekend but several brokers and traders predict the trend is downward.
"You'll see some profit taking but it is going to be pretty quiet with a lot
of people coming back from vacation," a trader said.
He added that poor refinery margins as BP Amoco announced that it has cut
crude oil processing levels across its European oil refining systems due to poor
margins, would pressure the market.
"Obviously if BP Amoco cut (runs) at its refineries, it is going to be a
problem for crude," he said.
The market is also focusing on gasoline ahead of weekly inventory data,
which showed a drop in implied demand the previous week. With the start of
driving season, brokers and traders said that demand has to rise to pull the
market higher.
"People are keeping an eye on this gasoline market," a broker said. "We'll
see what the APIs show."
Meanwhile, the market is also awaiting OPEC compliance numbers for May.
Kuwait's Oil Minister Sheikh Saud al-Nasser al-Sabah said that current oil
prices are "satisfactory" but should improve in the second half of the year.
Also, all members of OPEC favor extending the group's agreement made in
March to cut its collective oil output by over 1.7 million barrels per day to
support oil prices, a senior official at the Iranian oil ministry said.
OPEC agreed in March to curtail its output by 1.7 million barrels per day
for 1 year, starting Apr 1, in an effort to reverse a sharp 18-month decline in
oil prices.
"Everyone is in favor of an extension," said the source, speaking on
condition of anonymity.
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