Markets: News  

Oil prices end below $96 after four-session climb

SAN FRANCISCO (MarketWatch) -- Oil prices ended marginally lower Monday after a four-session climb, but stayed in a tight trading range as the market weighed speculation over a U.S. Strategic Petroleum Reserve release and news of a rise in Saudi Arabian production.

Oil for September delivery (CLU2) fell 4 cents to settle at $95.97 a barrel on the New York Mercantile Exchange.

Oil prices, which earlier climbed to as high as $96.53 and fell as low as $95.02, gained 3.5% over the past four trading sessions.

Traders realized "that last week's gains were a little ahead of themselves given the still flat economic backdrop," said Matthew Parry, senior oil-market analyst at the International Energy Agency. Oil was up 3.4% last week, marking its third consecutive weekly gain. Geopolitical issues surrounding Iran will continue to provide upside to prices, Parry said.

On Monday, BBC News said Tanzanian authorities confirmed that Iranian oil tankers have been using Tanzanian flags to evade economic sanctions on Iran's oil exports imposed by the U.S. and European Union.

Overall, however, "we have seen increased production throughout the [Persian] Gulf," said Tariq Zahir, a managing member at Tyche Capital, in an email.

News reports, citing data from the Joint Organization Data Initiative, said oil output from Saudi Arabia rose to the highest level in more than three decades in June.

"Of course, the reason why the Saudis are ramping up might cause more speculation as you can perhaps look at it in two ways," said Phil Flynn, senior energy analyst at The Price Futures Group, in a note. "Perhaps demand is getting better or cynically speaking the Saudis are trying to cushion the global oil market from a price shock if there is an attack on Iran."

On Friday, crude-oil futures rose on optimism about the U.S. economy and as investors expressed skepticism about a Reuters report that the U.S. government could be preparing to release some oil reserves.

Late Thursday of last week, Reuters reported that the White House was "dusting off old plans" to release some stocks from the U.S. Strategic Petroleum Reserve to ease gasoline prices but the report was debunked by the middle of Friday's trading session.

Still, the reserve talk "looks like it was an attempt for the administration to talk down the prices in the energy market," said Zahir. "We wouldn't be surprised to see an SPR release even if it is not an coordinated world-wide release."

"This could come to a head if unleaded gas goes over last week's high or if we see the storm that just came off Africa track towards the Gulf, but the track will not be clear until the latter part of the week," he said.

Oil's spike

The recent spike in oil prices isn't "getting the attention it deserves," said Michael Derks, chief strategist at FxPro.

Two months ago, "Brent crude fell below $90 a barrel but is now near $116, an increase of nearly 30%," the analyst wrote.

Israeli saber-rattling regarding Iran "and a significant tightening in U.S. oil inventories" are key factors, Derks said.

"For developing countries that rely on imported fuel, such as India and China, this recent price spike renders policy-making even more treacherous, at a time when both foreign and domestic demand have clearly weakened," he said.

On ICE Futures in London on Monday, October Brent was trading down 10 cents at $113.61 a barrel ahead of settlement.

Elsewhere in energy trading, natural gas for September delivery (NGU2) rebounded after some earlier weakness, closing up 6 cents, or 2.1%, to $2.78 per million British thermal units.

Natural gas likely found support from "a tropical wave that may develop into a storm later this week," said Beth Sewell, managing partner at Quantum Power & Gas Services. "Some paths project it going into the Gulf, although it is still way too early to tell what it may do and where it may go."

Heating oil for September (HOU2) finished nearly flat at $3.09 a gallon, while September gasoline (RBU2) ended at $3.03 a gallon, up less than a penny, or 0.1%.